Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?
A) $3.94
B) $24.00
C) $48.00
D) $51.94

Question

Quizplus · Accepted Answer

The interest earned on interest is calculated using the formula for compound interest. The total compound interest is $200 * (1.08)^3 - $200 = $51.94. The simple interest for three years is $200 * 0.08 * 3 = $48. The interest on interest is $51.94 - $48 = $3.94.

Consider a $200 Deposit Earning 8 Percent Interest Per Year