Determine whether the statement is true or false. If it is true, explain why it is true. If it is false, give an example to show why it is false.
If compound interest is converted annually, then the accumulated amount after t years is not the same as the accumulated amount under simple interest over t years.
A) False. Under compound interest , under simple interest. For example, if r=7%, P=$1,000, t=1 yr, so under compound interest A=1,070, and under simple interest A=1,070.
B) True. This follows from the definitions of the accumulated amount for compound and simple interest.

Question

Determine whether the statement is true or false. If it is true, explain why it is true. If it is false, give an example to show why it is false. ​
If compound interest is converted annually, then the accumulated amount after t years is not the same as the accumulated amount under simple interest over t years.
A) False. Under compound interest , under simple interest. For example, if r=7%, P=$1,000, t=1 yr, so under compound interest A=1,070, and under simple interest A=1,070. 
B) True. This follows from the definitions of the accumulated amount for compound and simple interest.

Quizplus · Accepted Answer

The statement is true because the accumulated amount under compound interest includes interest on interest, while the accumulated amount under simple interest does not. Therefore, it is generally better to invest with compound interest if given the option.

Determine Whether the Statement Is True or False