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What is the difference between simple interest and compound interest?

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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/03/14
Sheikh Basit Mehmood
by Sheikh Basit Mehmood , Audit Senior , RSM International

Simple interest, as the name shows, is simply the value derived from multiplying an interest rate with a principal value. On the other hand, a compound interest is a value derived by adding the original interest value (from simple interest rate) to the principal amount, and then applying the interest rate on the aggregated value.

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