Compound Interest and Simple Interest :How they work?

 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.

Compound Interest Vs Simple Interest formula
Compound Interest Vs Simple Interest

Table of Contents

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

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