ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Your investments will grow faster if it is calculated on the compound interest method as compared to the simple interest method because simple interest is calculated only on the principal amount whereas compound interest is calculated both on the principal and interest amount every year.

Detailed explanation-2: -Compound interest is often best when you’re saving money because you’ll earn interest on interest. But if you’re taking out a loan, a simple interest loan may be the better option since it could lead to less costs overall.

Detailed explanation-3: -In savings accounts, interest can be compounded, either daily, monthly, or quarterly, and you earn interest on the interest earned up to that point. The more frequently interest is added to your balance, the faster your savings will grow.

Detailed explanation-4: -Some common types of accounts that pay compound interest include savings accounts, money market accounts, and certificates of deposit (CDs). Investors can especially benefit from the power of compounding.

Detailed explanation-5: -Simple interest is money earned solely on the principal, or the original amount of money deposited. It doesn’t account for any interest earned over time. Compound interest is calculated using the principal balance plus any interest it has earned over time.