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What is the difference between compound and simple interest?

April 26, 2017answer compound difference Mathematics simple

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What is the difference between compound and simple interest?

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Compound interest takes a percentage of a sum and then adds this onto the total to create a new sum. This means the interest given increases with time as the interest is a percentage of a larger and larger total. Simple interest however is where a percentage is taken of an original sum but further interest given is still calculated from the original amount. This means that the interest given does not change over time as the interest is calculated from the same base sum.

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Compound interest is money in the bank that has interest added every time period. example: 10 in a bank at 10% interest per year year 1=11 year 2=12.1 year 3=13.21 Simple interest is money in the bank that has money added based on the origi…