Which one of the following statements is correct if you invest $100 in an account at a simple interest rate of 4% for ﬁve years?
A) You will earn more interest than if you invested in an account which compounded the interest.
B) For every $1 you earn in interest in the ﬁrst year, you will earn ($1.04) interest in the second year.
C) You will earn interest on interest for four of the ﬁve years.
D) The amount of interest you earn in year ﬁve will equal the interest you earn in year one, whether or not you reinvest your earnings.
E) The total interest you will earn over ﬁve years will be equal to $100 x (1 + .04)5.

Question

Quizplus · Accepted Answer

In simple interest, the interest earned each year is the same and does not depend on reinvestment or compounding.

Which One of the Following Statements Is Correct If You