What is defined as the investment of loan or principal which is based not only on the original amount of the loan or principal but the amount of loaned or principal plus the previous accumulated interest? A. Effective rate of interest B. Nominal rate of interest C. Compound interest D. Simple interest

The answer is C. Compound interest.

Compound interest is a form of interest on which the interest is added to the principal sum of a loan or deposit, so that from that moment on, the interest that accrues also earns interest. It is the most common way of calculating interest on loans and savings accounts.

Simple interest is a form of interest calculated on the principal

The effective rate of interest is the actual rate of interest paid or earned on a loan or investment. It takes into account the effects of compounding, which can make the effective rate of interest higher than the nominal rate of interest.

The nominal rate of interest is the stated rate of interest on a loan or investment. It does not take into account the effects of compounding.