What is the difference between Simple Interest and Compound Interest? The benefit of compounding is that even your interest would earn interest. Since now you had USD 1100 in the account, the bank pays you 10% interest on 1100 (which includes the USD 1000 you invested at the beginning and the USD 100 interest you earned at the end of the first year). And the bank did its part and added 10% at the end of the year. Now since you didn’t have any immediate use of the money, you let it stay in the account. Suppose you invest USD 1000 in a bank account that promises to give you 10% return at the end of the year. Let me take a simple example to explain it. Using Excel FV Function to Calculate Compound Interest.What is the difference between Simple Interest and Compound Interest?.
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