Interest-on-Interest Consider a $2,000 deposit earning 6 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?
A)$60.00
B)$76.45
C)$600.00
D)$676.45

Question

Quizplus · Accepted Answer

The total interest earned on the original deposit is simply the interest earned each year multiplied by the number of years:

Year 1: $2,000 x 0.06 = $120.00
Year 2: $2,000 x 0.06 = $120.00
Year 3: $2,000 x 0.06 = $120.00
Year 4: $2,000 x 0.06 = $120.00
Year 5: $2,000 x 0.06 = $120.00

Total interest earned = $120 x 5 years = $600.00.

We are asked to exclude any interest earned on interest, so the answer is C, $600.00.

Interest-On-Interest Consider a $2,000 Deposit Earning 6 Percent Interest Per