Question

The difference between simple profit and compound profit in case of Cooperative Society Savings Scheme

Answer 1

Difference between simple profit and compound profit, is as follows -

• Simple profit is gained by the simple interest on the principal amount. But, the compound profit is gained by the compound interest on the principal amount.
• Now, in the case of simple interest the initial principal amount stays constant throughout the whole time period.
• But, in the case of compound interest the initial principal amount increases every year by getting added with the interest of the previous year. This addition sequence goes on for the whole time period.
• Finally, the compound profit produces more profit than the simple profit due to the increasing principal amount in every consecutive years.