Discussion
Compound interest differs from simple interest in that compound interest is computed on
Answer: C
Correct answer: the accumulated balance including past interest
\[ F = P(1+i)^n. \] Each period’s interest is added to the balance and earns interest thereafter, so growth is exponential rather than linear. This is the assumption behind every factor in engineering economy, and it is why long horizons are so sensitive to the rate chosen.
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