What is the difference between simple interest and compound interest?
Simple interest is calculated as a percentage of the principal amount, while compound interest is calculated as a percentage of the principal amount plus any accumulated interest from previous periods.
In simple interest, the interest is only calculated on the original principal amount, while in compound interest, the interest is calculated on both the principal amount and any interest that has been added to the principal.
As a result, compound interest tends to grow faster over time compared to simple interest because the interest is being added to the principal amount, allowing for exponential growth.