Question

The total amount of money (Principal plus Interest) in the Compound and Simple Interest System are the same:

a. Only in the End of First cycle
b. In the End of second cycle
c. In the End of first and second cycles
d. It does not happen in any cycle

Answer 1

Simple and compound interest amounts are the same only at the end of the first cycle because compound interest has not yet begun to accumulate on previously earned interest.

Step-by-step explanation:

The question revolves around the concept of simple interest and compound interest. Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal amount plus any accumulated interest from previous periods. Therefore, the total amount of money will be the same between simple and compound interest only at the end of the first cycle or period, option a. This is because compound interest hasn't had the chance to compound on previously earned interest, making it effectively the same as simple interest for that first period.