Question

A first-time homebuyer is comparing mortgage rates. Option A offers the homebuyer 5.25% annual simple interest. Option B offers the homebuyer the same interest rate but compounded semiannually. If the repayment period is the same length for both loans, which option will result in the least amount of interest added to the loan?

Option A will have the least amount of interest because simple interest generates earnings from both principal and interest.

Option A will have the least amount of interest because simple interest generates earnings from principal only.

Option B will have the least amount of interest because compound interest generates earnings from principal only.

Option B will have the least amount of interest because compound interest generates earnings from both principal and interest.

Answer 1

Option A will have the least amount of interest because simple interest generates earnings from principal only.

Explanation:

got it right :D