Why do you earn more money using compound interest than you would using simple interest?

Answers

Answer 1

Interest is calculated as a percentage of the principal. With compound interest, the interest earned is added back into the principle so during the next period you start earning interest on the new, higher amount. Every time the interest compounds, it gets added into the principal and you earn more and more interest.

Example:

10% simple interest on $100:

(.1 * 100) +100 = 10 + 100 = $110

But if you do 10% interest compounding monthly for 3 months you have:

Month 1: (.1 * 100) +100 = 10 + 100 = $110

Month 2: (.1*110) +110 = $121

Month 3: (.1*121) + 121 = $133.10

Even with this simple example you can see how much more money is earned when your interest is compounded and added back into the principal.

Answer 2

Final answer:

Compound interest earns more money than simple interest because it allows the interest to continually compound, or accumulate, over time.

Explanation:

Compound interest earns more money than simple interest because it allows the interest to continually compound, or accumulate, over time. With compound interest, the interest is calculated not only on the initial principal, but also on any accumulated interest from previous periods. This results in a greater return on investment compared to simple interest. For example, if you invest $100 at a 5% interest rate compounded annually, after three years you will have $115.76, whereas with simple interest you would have only $115.00. The difference may seem small, but it can become significant when dealing with larger sums of money and longer time periods.


Related Questions

Many organizations are concerned about the rising cost of employee benefits and question their value to the organization and to the employees in your opinion what benefits are the greatest value to the employees? to the organization? why

Answers

Answer:

Benefits that are of most prominent incentive to the employees and to the organization are as per the following:  

The employees are obligated to get benefits that are variable and are a piece of salary bundle. These can incorporate house lease remittance, travel recompense, training stipend and advancement of the worker youngster and so forth.   Health, life and handicap benefits likewise to be incorporated into the salary. Phone recompense if the activity requires making a great deal of calls to different clients.   The firm ought to likewise give paid leaves and occasions to the employees to reproduce and revive their psychological capacity.

an employee who calls in sick to work so that they can attend social function lacks
a) time management skills
b) energy management skills
c) integrity
d) interpersonal skills ​

Answers

I would like to say C if i’m not mistaken

I would go with c integrity simply because integrity means being honest hardworking and having strong moral principles and obviously the employee isn’t showing any of that so C integrity

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