Compare simple interest and compound interest.

The major differences between simple interest and compound interest are as follows −

Simple interest

• It is the percentage interest on total principal amount.

• Low returns.

• Principal is constant.

• Growth of both principal and interest is constant.

• Interest will be charged only on principal amount.

• Easy to calculate.

• Formula: PTR/100.

Compound interest

• It is the percentage interest charged on principal and accrued interest.

• High returns compared to simple interest.

• Both principal and accrued amounts changes because of addition of interest during the period.

• Principal and interest will grow at pace.

• Interest will be charged on both principal and interest.

• Difficult to calculate, when compared to simple interest.

• Formula = P(1+(r/100))^t – P