Definitions

# What is interest?

###### Wiki User

###### 2014-05-23 09:12:39

Interest means that you borrow money, and you owe it back with a

little bit extra. e.g. you owe someone £10. After a month you give

that money back. But for having let you borrow it, you might now

owe £10 with 2 pounds (interest) added.

## Related Questions

###### Asked in Mathematical Analysis

### What is a simple interest in math?

Simple interest is interest that is calculated only on the
amount of unpaid principal on a loan. Such interest is not added to
the value of the loan but is tracked separately.
Compound interest is interest that is calculated on the total of
unpaid principal and accumulated interest on a loan.
The difference is in simple interest there is no interest
charged on accumulated interest while in compound interest there is
interest charged on accumulated interest.

###### Asked in Loans, Mathematical Finance, The Difference Between

### What are the major differences between compound interest loan and simple interest loan?

With compound interest, the interest due for any period attracts
interest for all subsequent periods. As a result, compound
interest, for the same rate, is greater.
With compound interest, the interest due for any period attracts
interest for all subsequent periods. As a result, compound
interest, for the same rate, is greater.
With compound interest, the interest due for any period attracts
interest for all subsequent periods. As a result, compound
interest, for the same rate, is greater.
With compound interest, the interest due for any period attracts
interest for all subsequent periods. As a result, compound
interest, for the same rate, is greater.

###### Asked in Investing and Financial Markets, Similarities Between

### What is simple interest and compound interest?

Compound interest is when interest is charged on the principal
plus the interest. An example is a credit card debt. If you carry a
balance from month to month you are charged interest on the total
amount owed including the interest from previous months. Simple
interest is calculated on the amount borrowed over a fixed amount
of time and does not charge interest on the interest.

###### Asked in Math and Arithmetic, Mathematical Finance, Similarities Between

### Is simple interest the same as compound daily interest?

No.
The "simple interest" method of calculation does not compound
interest. It takes the annual interest rate and divides it by 365
to get the daily rate. The daily rate is then multiplied by the
current balance to get the amount of interest that accrues per day.
This interest is kept in a separate account from the principle, and
interest does not accrue on the balance of that account.
In compound interest, the principle and interest are kept in the
same account, so interest accrues on past interest.

###### Asked in Interest Rates

### Is the annual interest rate the same as simple interest?

Usually no. Most institutions charge (and pay) compound
interest, NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.
Usually no. Most institutions charge (and pay) compound interest,
NOT simple interest.