Formula to find the difference between compound interest and simple interest for same principle,time and rate of interest
Answers
Interest is defined as the cost of borrowing money as in the case of interest charged on a loan balance. Conversely, interest can also be the rate paid for money on deposit as in the case of a certificate of deposit. Interest can be calculated in two ways, simple interest or compound interest.
Simple interest is calculated on the principal, or original, amount of a loan.
Compound interest is calculated on the principal amount and also on the accumulated interest of previous periods, and can thus be regarded as “interest on interest.”
There can be a big difference in the amount of interest payable on a loan if interest is calculated on a compound rather than simple basis. On the positive side, the magic of compounding can work to your advantage when it comes to your investments and can be a potent factor in wealth creation.
While simple interest and compound interest are basic financial concepts, becoming thoroughly familiar with them may help you make more informed decisions when taking out a loan or investing.
I hope it's can help you