Explanation Simple interest is based on the principal amount of borrowing. It is calculated as percent per year of the principal amount. Its formula is given below: S . I . = P R T 100 where P is the principal amount, R is the rate of interest and T is the time period. Compound interest is the interest which is periodically paid on both the originally principal and previous interest payment

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Author: David B. Johnson, Thomas A. Mowry

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The difference between simple interest and compound interest.

Solution Summary: The author explains the difference between simple interest and compound interest. Simple interest is based on the principal amount of borrowing.

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