Mathematics, 03.12.2019 10:31 garyperry

What is the key difference between simple interest and compound interest, and how does this difference affect the effectiveness of each?

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The simple interest is calculated only on the principal amount of a loan so it is relatively easier to calculate than the compound interest.

The compound interest is calculated on the principle amount plus the interest that the amount gets per compounding period up to the period of the loan. In other words, in compound interest we get, interest on interest.

This difference between the both, is the reason, we get more money in compound interest than simple one.

Let us take an example-

Suppose the principle is = $5000

r = 5% or 0.05

t = 5 years

Simple interest formula is :

$p\times r\times t$

=> $5000\times0.05\times5=1250$

So, total amount after 5 years will become = 5000+1250=6250 dollars.

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Lets check for compound interest where the interest is compounded annually.

p = $5000

r = 5% or 0.05

t = 5 years

n = 1

Compound interest formula is :

$A=p(1+\frac{r}{n} )^{nt}$

$A=5000(1+\frac{0.05}{1} )^{5}$

=> $A=5000(1.05)^{5}$

A = $6381.40

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We can see that we are getting more money in compound interest than the simple interest, for the same amount and same time period.

Answer from: kuehnkeegan

its Simple interest is based on the principal amount of a loan or deposit. In contrast, compound interest is based on the principal amount and the interest that accumulates on it in every period.

Step-by-step explanation:

Answer from: Quest

step-by-step explanation:

hello and welcome!

so, when we see the words "proportional" along with a table, we need to know that we're looking numbers that divide by the same thing.

looking at this table, we simply have to do a trial and error, and divide to see which numbers have the same quotient. if you look at choice a & c, they both have equal quotients for three of the numbers, with one exception, so those can't be the answer. looking at b, there is no similarity, so that can't be it. then, we see d; if you divide all the numbers in the table, you'll see that they all divide by two, which is a proportional relationship, and our answer!

$4/2 = 2\\7/3.5=2\\8/4=2\\10/5=2$

also, always remember that the x will always be the number that goes into y, and somewhere behind this table, is a formula. for this specific table, the formula would be:

$y=\frac{x}{2}$

since our x-value is being divided by two to get the y-value. and if they were to ask for more numbers in the series, this is the formula you would use to find them.

Answer from: Quest

b is the right answer

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