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An account that earns ______ interest will result in a higher annual percentage yield (APY).

A. basic
B. multiple
C. compound
D. simple

Sagot :

GinnyAnswer
To determine the type of interest that results in a higher annual percentage yield (APY), let's consider the options provided:

1. Basic Interest: This is not a standard term in finance. Typically, it doesn't specifically refer to an interest compounding mechanism that results in higher APY.

2. Multiple Interest: This is also not a standard term in finance. It doesn't clearly indicate a known method for calculating interest that would affect APY.

3. Compound Interest: This is a well-known method in which interest is calculated on both the initial principal and the accumulated interest from previous periods. This method results in interest earning on interest, which leads to a higher yield over time.

4. Simple Interest: This method calculates interest only on the principal amount, not on the accumulated interest. As a result, it doesn't yield as much as compound interest over the same period of time.

Given these definitions, we can analyze that compound interest results in a significant benefit due to the interest-on-interest effect. This compounding effect causes the annual percentage yield (APY) to be higher than it would be with simple interest or any other type of interest.

Therefore, the type of interest that results in a higher annual percentage yield (APY) is:

C. compound
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