When it comes to saving money, understanding the difference between simple and compound interest is key. Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal amount as well as the accumulated interest of previous periods.
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| Compound Interest Vs Simple Interest |
What is Simple Interest formula?
Simple Interest = ( Principle × Rate × Time ) ÷ 100
or
Simple Interest = PTR/100
where ; P =Principle
T=Time
R=Rate of interest
What is Compound Interest formula?
A = P(1 + r/n) (nt)
where;
A = Accrued amount (principal + interest)
P = Principal amount
r = Annual nominal interest rate as a decimal
R = Annual nominal interest rate as a percent
r = R/100 n = number of compounding periods per unit of time
t = time in decimal years