Question

Describe the difference between simple interest and compound interest

Answer 1

Simple interest is only based on the principal amount of a loan, while compound interest is based on the principal amount and the accumulated interest. Simple interest is calculated by multiplying the principal amount by the interest rate and the number of periods in a loan.

Answer 2

Explanation:

Simple interest is based on the principal amount of a loan or deposit, while Compound interest is based on the principal amount and the interest accumulates on it in every period.

Simple interest is calculated by multiplying the principal amount by the interest rate and the numbers of periods in a loan.

compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.

Formula of Simple interest = I= P × r × t

Formula of Compound interest = I = P ×(1 + r/n)
`^(nt)`

Return of simple interest is less, and return of compound interest comparatively high.

Simple interest is easier to determine than compound interest.