General Science, Mathematics, and TechnologyMathematics |
What is the difference between simple interest and compound interest? |
Simple interest is calculated on the amount of principal only. Compound interest is calculated on the amount of principal plus any previous interest already earned. For example, $100 invested at a rate of five percent for one year will earn $5.00 after one year earning simple interest. The same $100 will earn $5.12 if compounded monthly.