Simple Interest vs Compound Interest
Compare simple interest and compound interest with examples.
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Simple Interest
Interest is calculated only on the principal amount.
SI = (P x R x T) / 100
Compound Interest
Interest is calculated on principal plus accumulated interest.
A = P(1 + r/n)^(nt)
Comparison Example
Principal: 10,000, Rate: 10%, Time: 3 years
Simple Interest: 10000 x 10 x 3 / 100 = 3,000
Compound Interest: 10000(1.10)^3 - 10000 = 3,310
Key Difference
Compound interest grows faster because you earn interest on your interest.