Simple Interest and Compound Interest
Learn the difference between simple and compound interest and how each grows money over time. Let’s get started! 🚀
Video Lesson
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Flashcards
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🛎️ How to Calculate Simple Interest?
- Interest = Principal × rate × time, calculated on the original amount only.
- The total amount = Principal + Interest, since the principal stays the same each year.
🛎️ How to Calculate Compound Interest?
- The total amount is calculated using Total = Principal × (1 + rate)ᵗ.
- Interest is added to the principal each year, so the amount keeps increasing.
- The interest is calculated using Interest = Total − Principal.
🛎️ Simple and Compound Compared
- Simple interest increases by the same amount each year.
- Compound interest increases faster over time because interest is added to the total.
- Compound interest is commonly used by banks.
Practice Questions
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Interactive Activity
Compare how simple interest and compound interest grow your money over time
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