Renee invested $2,000 six years ago at 4.5 percent interest. She spends her earnings as soon as she earns any interest so she only receives interest on her initial $2,000 investment. Which type of interest is she earning?
Simple interest is s type of interest whereby the money earned or money paid is done on the original amount of money that was invested or borrowed. It indicates the amount you pay on getting a loan or the amount of income received on investment. Since Renee only receives interest on her initial $2000 investment and not on interest which was previously added to the $2000, then Renee is earning from Simple interest.
