Simple interest grows exponentially over time.

Question

BlackTom AI · Accepted Answer

The statement under review is: 'Simple interest grows exponentially over time.'
Option 1: True. This is not correct because simple interest does not compound. In simple interest, the interest earned each period is calculated on the initial principal only, resulting in a total amount that increases linearly with time rather than exponentially. The growth pattern is a straight-line increase when plotted against time.
Option 2: False. This is the accurate characterization. Simple interest grows linearly because the interest amount added each period is constant (I = P × r × t total), so the total amount after t periods is A = P + P × r × t, which is a linear function of t. Exponential growth would require compounding, where interest is earned on both the principal and previously accumulated interest, leading to rapid, multiplicative increases over time.

Simple interest grows exponentially over time.

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