Question

Using 1-3 complete sentences, why would you want compound interest instead of simple interest?

Answer 1

I would want compound interest instead of simple interest because compound interest earns interest on interest, which means that your money grows faster over time. For example, if you invest $1,000 at 5% interest compounded annually, you will have $1,276.28 after 5 years, while you would only have $1,250 after 5 years with simple interest.

In other words, compound interest allows your money to grow exponentially, while simple interest only allows it to grow linearly. This means that compound interest can have a much larger impact on your wealth over the long term.

Answer 2

I prefer compound interest because the amount paid to me keeps on increasing.

l prefer compound interest because the interest rate can change perhaps to a gain in the paid amount.

l prefer compound interest because the new principle shall accumulate more on the next interval