Which statement is true about simple interest?

Which statement is true about simple interest?

• A. Simple Interest
• B. The interest rate
• C. A monthly maintenance fee
• D. The total balance after withdrawals

Answer: (A)

Simple interest means you earn or owe interest only on the original amount (the principal), not on interest that has already accumulated. This is defined by the calculation I = P × r × t, where you multiply the principal by the rate and the time the money is invested or borrowed. The option that simply states “Simple Interest” is true because it directly refers to the concept itself. The other choices don’t describe how simple interest works: the interest rate is just a part of the calculation, a monthly maintenance fee isn’t about how interest is computed, and the total balance after withdrawals depends on the cash flows, not on the method of interest calculation. For example, with a $1,000 principal at 5% for 2 years, the interest would be $100 and the total would be $1,100 under simple interest.

Simple interest means you earn or owe interest only on the original amount (the principal), not on interest that has already accumulated. This is defined by the calculation I = P × r × t, where you multiply the principal by the rate and the time the money is invested or borrowed. The option that simply states “Simple Interest” is true because it directly refers to the concept itself. The other choices don’t describe how simple interest works: the interest rate is just a part of the calculation, a monthly maintenance fee isn’t about how interest is computed, and the total balance after withdrawals depends on the cash flows, not on the method of interest calculation. For example, with a $1,000 principal at 5% for 2 years, the interest would be $100 and the total would be $1,100 under simple interest.