Differences and similarity’s of Simple vs compound

Compound interest

In the real world, simple interest is rarely used. When you deposit money into an interest-bearing account, or take out a line of credit, the interest that accumulates is added to the principal, and the next interest calculation is done on both the principal and the interest.

Similarities and differences

As an investor or depositor, you definitely want to earn compound interest, as it adds up greater over time. In the above example of the $1,000 five-year CD at 4%, a simple interest calculation would produce $200, $21 less than the monthly compounding.

step-by-step explanation:

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