ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Simple Interest is applied yearly and compound interest is applied quarterly.
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Simple interest is less than 10% and Compound interest is above 10%.
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Compound Interest is calculated only on the principal amount of a loan. Simple Interest is calculated on the principal amount and also on the accumulated interest of previous periods, and can thus be regarded as “interest on interest.”
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Simple Interest is calculated only on the principal amount of a loan. Compound Interest is calculated on the principal amount and also on the accumulated interest of previous periods, and can thus be regarded as “interest on interest.”
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Detailed explanation-1: -The major difference between simple interest and compound interest is that simple interest is based on the principal amount. In contrast, compound interest is based on the principal amount and the interest compounded for a cycle of the period.
Detailed explanation-2: -Interest can be calculated in two ways: simple interest or compound interest. 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.”
Detailed explanation-3: -Simple interest is based on the principal amount of a loan or deposit. In contrast, compound interest is based on the principal amount and the interest that accumulates on it in every period.
Detailed explanation-4: -( 820-800 ) = Rs. 20. Thus, the difference between the compound interest and the simple interest is Rs. 20.
Detailed explanation-5: -The difference between the compound interest and simple interest on a certain sum of money at 10% per annum for 2 years is Rs. 500.