Question

What is compound and simple interest.

Answer 1

Simple interest is based on the principal amount of a loan or deposit, while compound interest is based on the principal amount and the interest that accumulates on it in every period. Since simple interest is calculated only on the principal amount of a loan or deposit, it's easier to determine than compound interest.

Answer 2

Explanation:

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan.

Simple interest is a quick and easy method of calculating the interest charge on a loan. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.