Question

Why is compound interest more advantageous than simple interest?

a. Compound interest is attached to the stocks with the highest risk, so you get the highest interest on them.
b. Compound interest accumulates very rapidly, so you only have to save for 3 years or fewer to earn far more money.
c. It's more difficult to calculate, so fewer people use compound interst, making more profits for those who do.
d. In compound interest, you earn interest on not only your principal, but also the interst you've already made.

Answer 1

Compound interest is more advantageous than simple interest because it allows the interest to accumulate on both the principal and the interest already earned. This leads to exponential growth and higher total amounts over time. Compound interest also encourages long-term saving and investing.

Step-by-step explanation:

Compound interest is more advantageous than simple interest because it allows the interest to accumulate on both the principal and the interest already earned.

This means that over time, the total amount of money will grow at a faster rate compared to simple interest. For example, if you invest $100 at a compound interest rate for three years, you will earn interest on the initial $100 as well as on the interest that has already been earned, resulting in a higher total amount.

This growth is exponential and can make a significant difference, especially when dealing with larger sums of money and longer time periods. Compound interest also encourages long-term saving and investing, as the interest continues to compound over time.