Simple intrest is one you are making on the principle. Compound Intrest is one your are making on principle plus intrest you have earned on it. So basically you are making Intrest on the Intrest you have earned on your principle.
For Example: Compound Intrest, You have $5000.00 invested in a CD, First month you have earned $100.00 on that CD in intrest, in following month you will earn more because you are getting paid intrest on your $100.00 you have earned in intrest in first month and it goes on like that.
in simple intrest you won't make intrest on intrest you have earned, you will only earn it on actuall $5000.00.
P(r/100)^2
Simple interest is based on the original principle of a loan. Simple interest is generally used on short-term loans. Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on.
simple interst is when you earn interest from your principal but compound interest is when you earn interest from your principal as well as from your previous interest
There is simple interest and there is compound interest but this question is the first that I have heard of a simple compound interest.
Visit the lender and verify that this is actually happening. There is a difference between simple interest and compound interest based on the interest and the principle outstanding.
Compound interest gives you more, but at a low interest rate (less than 10%), the difference is negligible.
Simple: 160 + (1.6 x 4 x 2) = 172.80 Compound: 160 x (1.04)2 = 173.06
With compound interest, after the first period you interest is calculated, not only on the original amount but also on the amount of interest from earlier periods. As to "better" or not, the answer depends on whether you are earning it on savings or paying it on borrowing!
Simple interest is obtained where you take the interest every year/set period as opposed to compund interest where interest is calculated on the previous answer.For Example: Adding 10% Interest, Starting With 100.Simple: 100, 110, 120, 130...Compund: 100, 110, 121, 133.1...
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.
simple move slower
That depends on how the interest works.Is it simple interest ? Is it compound interest ?If compound, then how often is it compounded ?8% simple interest turns $2 into $40 in 237.5 years .8% compound interest, compounded quarterly, does the job in 37.8 years .As you can see, it makes quite a difference.