Question

What is compound interest and simple interest?

Answer 1

Simple interest is only based on the principal amount of a loan, while compound interest is based on the principal amount and the accumulated interest.
Simple interest is calculated by multiplying the principal amount by the interest rate and the number of periods in a loan.
Compound interest is a great thing when you are earning it! Compound interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned.