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 refers to the process of adding interest to the initial deposit and then earning interest on the new total, including the previously earned interest. This leads to a faster growth of the investment than simple interest, where interest is only calculated on the principal amount. The annual percentage rate (APR) represents the annualized interest rate charged on a loan or earned on an investment. The time value of money refers to the concept that money today is worth more than the same amount of money in the future due to inflation and the opportunity cost of not being able to invest it earlier. The future value of money is the expected value of an investment at a future time, calculated using a specific interest rate and compounding method.

When Interest Is Added to Your Initial Deposit and You