Multiple choice

Directions: State whether the following statement is True Or False.

In case of compounding, the basic amount on which interest is received, remains constant.

  1. True

  2. False

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In compounding, interest is added to the principal at the end of each period. This new total becomes the principal for the next period, meaning the amount on which interest is calculated increases over time.