Interest is the return of an amount over the payment of principal by a lender or payment financial company to a creditor or bondholder at a set rate. It is not to be confused with a fee that the borrower may pay to the creditor or a potential buyer.
The correct option is interest on the principal and the interest earned in each period.
The reason for the correct answer is:
The original investment of a debt or investment is the main attribute to calculate simple interest. Compound interest is calculated by using the principal sum and the curiosity that accumulates on it over time.
Simple interest is easier to compute as compared to compound interest because it is calculated on the principal balance of the loan or bank.
The simple interest is calculated as:
[tex]\text{Simple interest} = P \times R \times T[/tex]
On the other hand, the compound interest is calculated as:
[tex]\text{Compound Interest} = P\times (1+r)^{t} -P[/tex]
To know more about the simple and the compound interest, refer to the link below:
https://brainly.com/question/11203691
