2. What is the difference between compounding and simple interest? (2 points)

1 answer:

5 0

Answer: Simple interest is calculated only on the principal amount, when compounded is calculated on the principal amount and the interests.

Explanation:

Hi, the difference between compounding and simple interest is that the simple interest is calculated only on the principal amount deposited, the original amount.

A = P (1 + rt)

In the other hand, compounded interest is calculated on the principal amount and in the accumulated interests of the different periods (interest on interest)

A = P (1 + r/n) (nt)

n is the number of times that interest is compounded per unit t

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