Question
An investor deposits $100.00 and earns $6.00 of interest in the first year and $6.36 of interest in the second year. This means the investment is earning 6% [blank] interest.
Answers
GPT-4o mini
The investment is earning 6% **compound** interest.
In the first year, the investor earns $6.00 on the initial $100.00 deposit (which is 6% of $100.00). In the second year, the interest is calculated on the new total of $106.00, which gives $6.36 in interest (which is 6% of $106.00). This indicates that the interest is being calculated on the growing total, characteristic of compound interest.
In the first year, the investor earns $6.00 on the initial $100.00 deposit (which is 6% of $100.00). In the second year, the interest is calculated on the new total of $106.00, which gives $6.36 in interest (which is 6% of $106.00). This indicates that the interest is being calculated on the growing total, characteristic of compound interest.