find the difference between simple interest and compound interest
Answers
Answer:
Simple Interest refers to an interest that is calculated as a percentage of the principal amount. Compound Interest refers to an interest which is calculated as a percentage of principal and accrued interest.
Answer:
-Compound Interest: The banks calculate the interest for 1st year. For second year the interest is again calculated but the deposit taken is increased by the interest of 1st year.
For example, If you have deposited 1000$ for 3 years at a interest rate of 10%, the interest of 1st year will be 100$. Then for 2nd year, the interest would be calculated by taking the deposit as Primary deposits plus the interest of 1st year, so the deposit would be taken 1100$ and the interest for 2nd year will be 110$. Similarly, interest for 3rd year is calculated
-Simple Interest: The banks calculate the interest for all the three year by taking the deposit same as that you had deposited.
For example, If you have deposited 1000$ for 3 years at a interest rate of 10%. The interest for all the three years will be calculated by the deposit that you had gave i.e. 1000$. So the interest rate for all the three years will be same equal to 100$.