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Simple interest:

  • Calculated on the original/principal amount invested.
  •  Accumulated interest from prior periods is not used in calculations for the following period.
  • Money charged by the lender on the fixed amount for a certain period of time.
  • Interest charged remain fixed√ for the full period of investment.

Compound interest:

  • Calculated each period on the original/principal amount including all interest accumulated during past periods.
  • Based on the concept of adding accumulated interest to the original/principal amount√ and interest is earned on interest.
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