In your own words, without providing the formulas, describe the difference between simple interest and compound interest. Which type of interest earns money more quickly?


Respuesta :

Simple interest is when interest is paid once on money.  Compound interest is paid periodically.  Compound interest earns money more quickly because you are actually earning interest on interest.  For example, if interest is compounded monthly you will received interest on your principal in January, and then in February you will receive interest on the principal and on the interest that was earned in January.

Sample Response: Simple interest is applied only to principal investment amounts each year. Compound interest applies to principal investment amounts, but also applies to any previously earned interest. Compound interest earns money more quickly.