An investment that earns interest on interest is said to be earning a:
A) discounted rate of return.
B) fully compounded rate of return.
C) consolidated rate of return.
D) risk-free rate of return.
E) tax-free rate of return.

Question

Quizplus · Accepted Answer

A fully compounded rate of return means that the interest earned is reinvested and earns interest itself, resulting in exponential growth of the investment over time.

An Investment That Earns Interest on Interest Is Said to Be