Question

what is the difference between compound and simple interest?​

Answer 1

Answer:

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."

Answer 2

Step-by-step explanation:

The major difference between simple interest and compound interest is that simple interest is based on principal amount whereas compound interest is based on the principal amount and the interest compounded for a cycle of the period.

We know that simple interest and the compound interest are the two important concepts widely used in many financial services most especially in banking purposes. Loans such as instalments loans, auto loans, educational loans, mortgages use simple interest. The compound interest is used by most of the savings account as it pays the interest. It pays more than the simple interest. In this article, let us discuss the difference between the simple interest and the compound interest in detail.

Definition of Simple and Compound Interest

Simple Interest: The simple interest can be defined as the principal amount of loan or deposit, a person makes into their bank account.

Compound Interest: The Compound interest is simply the interest that accumulates and compounds over the principal amount.