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Art invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as ____________.

Respuesta :

Answer:

The correct answer is: Interest on interest.

Explanation:

Interest on interest is the percentage obtained out of an initial investment after the initial amount plus interest (the total) is invested one more time. Interest on interest is also called Compound Interest. The term is often used when talking about bonds.

Just like in Art's case, the initial investment was $100 earning $8 the first year. He reinvested $108 and earned an additional $8.64 for the second year. The $0.64 represents his interest on interest.

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