You may hear the word "interest" tagged along with an investment you have made or on a borrowing. For explanation let's take a $ 200 deposit made in a bank which pays 10% annual interest.
Deposit - $ 200
Interest - 10% per Annum
Simple Interest Compound Interest
Make your life easy!!! The difference is simple to understand.
In Simple Interest there will be a constant interest gain as every year end you will pull out the interest whereas as in Compound Interest the interest will be increasing annually as the capital considered to calculate the interest for each year will be accumulating (Because you don't pull out the interest every year end).
Purindu B Jayatilake
MSc Eng(Reading), MBA, BSc (Hons) Eng, ACMA (UK), CGMA
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