What is compound interest?

A Interest calculated only on the initial principal

B Interest calculated on the principal plus accumulated interest

C A fixed interest rate that never changes

D Interest paid only at the end of the term

✓ Correct Answer: Option B

Compound interest is calculated on both the initial principal and the accumulated interest from previous periods, making your money grow exponentially over time.

💡 Why is B) the correct answer?

The correct answer to the question "What is compound interest?" is Option B: Interest calculated on the principal plus accumulated interest.

The other options — A) Interest calculated only on the initial principal, C) A fixed interest rate that never changes, D) Interest paid only at the end of the term — are incorrect for this General Knowledge question. As explained above: Compound interest is calculated on both the initial principal and the accumulated interest from previous periods, making your money grow exponentially over time.

📚 About This General Knowledge Practice Question

This 1-level General Knowledge question from the Abbreviations & Full Forms topic is part of One Paper Preparation's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free General Knowledge practice test or use flashcards for spaced repetition review.

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What is compound interest?

✓ Correct Answer: Option B

📚 About This General Knowledge Practice Question

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