defination on simple interest and compound interest
Answers
Compound interest allows you to earn interest on interest.
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Explanation:
Step-by-step explanation:
Simple interest
Simple interest is the money which we can earn by investing some amount (principal) for certain number of years.
Simple Interest (SI) is the additional money besides the original money paid by the borrower to the moneylender as a compensation for the money used by him. The money borrowed is called the principle where the money paid by the borrower to the moneylender is called the amount. Simple Interest is the difference of amount and the principle.
Simple Interest = Amount Principle
compound interest
Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest
Money is said to be lent at compound interest , when at the end of a year( or,some other fixed period) the interest is not paid to the money lender, but is added to the sum lent, and the amount thus obtained becomes the principal for the next period. This process is repeated until the amount for the last period has been found. The difference between the original sum and the final sum is the compound interest.