Question

Explain the difference between a savings account earning simple interest and a savings account earning compound interest.

Answer 1

@dumbcow @kropot72

Answer 2

With earing compound interest i believe u earn more money than u would with just simple interest

Answer 3

Is that right @dumbcow

Answer 4

yes that is true...with simple interest you earn a constant amount of interest each year

with compound int you earn a constant rate....the amount increases each year as the balance increases

Answer 5

so then it would be better to open up a compund interest account right?

Answer 6

If u want more money then yes

Answer 7

say you have $100 at 5% interest
with simple int you earn $5 per year

with compound you earn $5 1st year, then (.05*105) = $5.25 the 2nd year and
(.05*110.25) = $5.51 the 3rd year ...

Answer 8

say you have $100 at 5% interest
with simple int you earn $5 per year

with compound you earn $5 1st year, then (.05*105) = $5.25 the 2nd year and
(.05*110.25) = $5.51 the 3rd year ...