Question

drag the tiles to the correct location on the table. match each characteristic to the corresponding type of interest. chart with simple interest and compound interest rows, and tiles: earns interest once on the initial deposit, earns interest multiple times, is a powerful tool for growing your money, offered on most savings options,may be calculated as a penalty for early withdrawals

Explanation:

To solve this, we recall the definitions and characteristics of simple and compound interest:

Simple Interest:

• Earns interest once on the initial deposit: Simple interest is calculated only on the principal (initial deposit) amount. The formula is \( I = P \times r \times t \), where \( I \) is interest, \( P \) is principal, \( r \) is rate, and \( t \) is time. It does not earn interest on previously earned interest.
• May be calculated as a penalty for early withdrawals: Some simple - interest - based accounts (like certain savings or fixed - deposit accounts with simple interest) may have penalties for early withdrawal, as the bank expects to earn interest over the agreed - upon time period.
• Offered on most savings options: Many basic savings accounts, especially in some traditional or simpler financial products, offer simple interest.

Compound Interest:

• Earns interest multiple times: Compound interest is calculated on the principal and also on the accumulated interest of previous periods. So interest is earned on interest, multiple times over the life of the investment/loan. The formula is \( A=P(1 + \frac{r}{n})^{nt}\), where \( A \) is the amount, \( P \) is principal, \( r \) is annual rate, \( n \) is number of times interest is compounded per year, and \( t \) is time in years.
• Is a powerful tool for growing your money: Because of the compounding effect (earning interest on interest), compound interest can lead to exponential growth of money over time, making it a powerful tool for long - term savings and investment.

Answer:

Simple Interest:

• earns interest once on the initial deposit
• may be calculated as a penalty for early withdrawals
• offered on most savings options

Compound Interest:

• earns interest multiple times
• is a powerful tool for growing your money