When interest is added to your initial deposit and you begin to earn interest on interest,this is known as
A)the annual percentage rate.
B)the time value of money.
C)compounding.
D)the future value of money.

Question

Quizplus · Accepted Answer

Compounding is the process of earning interest on both the principal amount of money deposited and the interest that has accumulated on that deposit. As the interest earned is added to the initial deposit, the overall account balance grows at an increasing rate, resulting in higher returns over time. This is a powerful financial concept that can help investors maximize their wealth-building potential. Therefore, compounding is the best choice that describes the situation described in the question.

When Interest Is Added to Your Initial Deposit and You