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26 February, 01:13

Art invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:1. Free interest. 2. Bonus income. 3. Simple interest. 4. Interest on interest. 5. Present value interest.

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  1. 26 February, 05:00
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    Option 4 - Interest on Interest

    Explanation:

    Look we earned $8 in the first year which we invested in the same business. Okay now we again earned 8% on this $100 and $8 invested in the second year. The 8% on the $8 is $0.64 which is the interest earned on the interest invested in the previous year.
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