Interest on interest refers to the interest earned on: a. prior interest payment

Question

Interest on interest refers to the interest earned on: a. prior interest payment. b. both principal and prior interest payments. c. both principal and future interest payments. d. simple interest loans. e. the principal of a discount loan. Interest on interest refers to the interest earned on: a. prior interest payment. b. both principal and prior interest payments. c. both principal and future interest payments. d. simple interest loans. e. the principal of a discount loan. Interest on interest refers to the interest earned on: a. prior interest payment. b. both principal and prior interest payments. c. both principal and future interest payments. d. simple interest loans. e. the principal of a discount loan.

Explanation / Answer

1 answer a prior interest payaments interest on interest means the interest earned upon the reinvestment of interest income. Interest on interest is generally used in the areas of coupon paying bonds, where all coupon payments are reinvested at some interest rate and held until the bond matures, or when the bond is sold

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