Simple interest and compound interest are two different methods of calculating the interest earned or paid on a loan or investment.
Simple interest is calculated as a percentage of the principal amount borrowed or invested, and remains the same throughout the term of the loan or investment. It is calculated only on the principal amount and not on any accumulated interest. For example, if you borrow Rs. 10,000 at a simple interest rate of 5% for 3 years, you will pay Rs. 1,500 in interest (5% of Rs. 10,000 for 3 years).
Compound interest, on the other hand, is calculated not only on the principal amount but also on the accumulated interest from previous periods. This means that the interest earned in each period is added to the principal amount, and the interest in the following period is calculated on the new, higher balance. This compounding effect leads to higher interest payments over time compared to simple interest. For example, if you invest Rs. 10,000 at a compound interest rate of 5% for 3 years, you will earn Rs. 1,576.25 in interest (compared to Rs. 1,500 in simple interest), because the interest is compounded annually.
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Step-by-step explanation:
Simple interest is calculated on the principal, or original, amount of a loan. Compound interest is calculated on the principal amount and the accumulated interest of previous periods, and thus can be regarded as “interest on interest.”
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Step-by-step explanation:
Simple interest and compound interest are two different methods of calculating the interest earned or paid on a loan or investment.
Simple interest is calculated as a percentage of the principal amount borrowed or invested, and remains the same throughout the term of the loan or investment. It is calculated only on the principal amount and not on any accumulated interest. For example, if you borrow Rs. 10,000 at a simple interest rate of 5% for 3 years, you will pay Rs. 1,500 in interest (5% of Rs. 10,000 for 3 years).
Compound interest, on the other hand, is calculated not only on the principal amount but also on the accumulated interest from previous periods. This means that the interest earned in each period is added to the principal amount, and the interest in the following period is calculated on the new, higher balance. This compounding effect leads to higher interest payments over time compared to simple interest. For example, if you invest Rs. 10,000 at a compound interest rate of 5% for 3 years, you will earn Rs. 1,576.25 in interest (compared to Rs. 1,500 in simple interest), because the interest is compounded annually.
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Verified answer
Answer:
Bro answer is below please can you again mark me as brainliest plz.
Step-by-step explanation:
Simple interest is calculated on the principal, or original, amount of a loan. Compound interest is calculated on the principal amount and the accumulated interest of previous periods, and thus can be regarded as “interest on interest.”