The correct option is B). Compounding interest.
What is a compound interest?
Compound interest is refer to the interest amount that is calculated on a loan or deposit based on both the initial principal amount and the accumulated interest from the previous periods. It can be thought of as “interest on interest".
The rate at which compound interest accrues or arises, basically depends on the frequency of compounding period. The higher the number of compounding periods, the greater the rate of compound interest.
Compound interest can be calculated by subtracting principal amount at present from the total amount of principal and interest in future i.e. [P (1 + i)n] – P
Here, P = principal, i = nominal annual interest rate in percentage terms and n = number of compounding periods.
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