BANKING AFFAIRS

Detailed explanation-1: -Answer and Explanation: It is better to have a compound interest that pays 5% interest compounded daily. This is because even though the two accounts have the same rate of interest, the frequency of the 5% interest compounded daily account is higher.

Detailed explanation-2: -By definition, a bank that pays simple interest on a savings account will pay interest: only on the initial investment. Compound interest is defined as the interest earned: on both the initial principal and all interest earned and reinvested in prior periods.

Detailed explanation-3: -Multiply your principal by the interest rate, and then the amount of time you expect to keep that money in the account. One hundred dollars times 5 percent, or 0.05, is $5. Keep that account going for 50 years, and you’ll earn $250 in interest, for a grand total of $350.

Detailed explanation-4: -Compound interest causes your wealth to grow faster. It makes a sum of money grow at a faster rate than simple interest because you will earn returns on the money you invest, as well as on returns at the end of every compounding period. This means that you don’t have to put away as much money to reach your goals!