Question

Why is simple interest simple and when is it used?

Answer 1

Simple Interest is considered "Simple" due to it's straight-forward method; where you add your annual interest rate (%) to your initial principal value, instead of compound which you add your annual interest rate (%) onto your new principal value.

Simple interest is usually used to calculate their first year interest ($).

Answer 2

Simple interest is the cost of using or borrowing money without compound interest or interest on interest. Simple interest works in your favor when you're a borrower because it keeps the overall amount that you pay lower than it would be with compound interest

Explanation: