ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Simple
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Compound
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Either-They will be the same
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Neither-Credit Card Companies can’t charge interest
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Detailed explanation-1: -As a borrower, simple interest is better because you’re not paying interest on interest. It’s easier to repay debt with simple interest. Compound interest can help you to build wealth over time because your earnings also earn money.
Detailed explanation-2: -The majority of credit card issuers compound interest on a daily basis. This means that your interest is added to your principal (original) balance at the end of every day.
Detailed explanation-3: -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-4: -Typically, a deposit account earns either simple or compound interest. A simple-interest account pays interest on the principal amount. A compound-interest savings account earns interest on the principal balance and interest.
Detailed explanation-5: -Credit card interest is typically compounded daily, which means your credit card issuer charges interest to your account each day based on its average daily balance. The larger your balance grows, the more interest that will be added on top of the amount you owe.