Question

exit ticket investment
which of the following statements is true about compound interest?
○ compound interest is difficult to calculate, so those who use it earn higher profits for their efforts
○ compound interest means you have a fund manager who is compounding your returns without charging a fee
○ compound interest allows you to earn interest not only on the amount you have saved, but also on the interest youve already earne
○ compound interest directly impacts how much you will be charged in fees

Explanation:

To determine the true statement about compound interest, we analyze each option:

• The first option is incorrect because compound interest is not inherently difficult to calculate, and it rewards savings growth, not effort - based profit misrepresentation.
• The second option is incorrect as compound interest does not relate to a fund manager compounding returns without fees (that's not the definition of compound interest).
• The third option is correct. Compound interest is calculated as interest on the principal amount plus interest on previously earned interest. So, it allows earning interest on the saved amount and the interest already earned.
• The fourth option is incorrect because compound interest relates to growth of savings/ investments, not fee - related changes.

Answer:

The option "Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned" (the third option among the given choices).