What is the difference between compound interest and simple interest? Explain using an example
Answers
Answer:
While both types of interest will grow your money over time, there is a big difference between the two. Specifically, simple interest is only paid on principal, while compound interest is paid on the principal plus all of the interest that has previously been earned.
Step-by-step explanation:
Interest is only charged based on the use of funds. ... Example of simple interest is car loans where the interest has to be paid on the amount borrowed. Compound interest is calculated on the revised principal. The revised principal is calculated based on the interest charged on the accrued interest.
According to formula,
According to formula,An = P( 1 +r/100)
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initially
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2so, {An} is in Geometric progression.
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2so, {An} is in Geometric progression.now,
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2so, {An} is in Geometric progression.now,amount payable after 5years
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2so, {An} is in Geometric progression.now,amount payable after 5yearsA5 =10,000(1.1)^5
According to formula,An = P( 1 +r/100)Where A is total amount after n years, r is the rate. P is the amount initiallyAn =10, 000( 1 + 10/100)=10,000( 1+0.1)"=10,000(1.1)An =10,000(1.1)now, put n = 1 A1 =10, 000(1.1), put n =2, A2 =10,000(1.1)2in the same way, A3 =10, 00(1.1)you can see that A2/A1 = A3/A2so, {An} is in Geometric progression.now,amount payable after 5yearsA5 =10,000(1.1)^5=16, 105.1 Rs