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28 April, 16:01

A friend asks you what sort of interest-simple or compound - is better. What would your answer be, and why?

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  1. 28 April, 17:42
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    Compound interest is better than simple interest

    Explanation:

    Compound interest is better than simple interest especially when it comes to investing. Funds grow at a faster rate in compound interest than simple interest.

    Simple interest is the interest on only the principal while compound interest is the interest on principal and on the previous accumulated interest (that is, interest on interest).

    The formula for simple interest is:

    P x r x t

    Where P is the principal

    r is the interest rate

    t in the time.

    For compound interest:

    A=P (1+r/n) ^nt.

    A is the amount after compounding.

    P is the principal.

    r is the interest rate

    n is the number of times interest compounds (adds up) per year

    t is the number of years.
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