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18 August, 10:27

Which describes the difference between simple and compound interest?

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  1. 18 August, 12:59
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    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 that accumulates on it in every period. Since simple interest is calculated only on the principal amount of a loan or deposit, it's easier to determine than compound interest
  2. 18 August, 13:08
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    Simple interest is calculated as a percentage of the principal amount and stays the same if the principal. amount and the percentage don't change.

    However, the compound interest is based on accumulating the interest to the principal amount. That is, after a certain percentage is calculated as the interest, that interest is added to the principal amount and the next period's interest is based on the principal+the interest.
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