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what is the difference between compound interest and simple intrest

label Mathematics
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how do i know which one the problem is asking me to find and how do i find it

Oct 22nd, 2017

simple interest is interest paid on the original principal  deposited into a bank \

annual interest rate is 8%.

How much interest after 4 years?

 simple interest formula:

I = p× r × t

p is the principal or money deposited

r=interest rate

t =time

I = p× r × t

I = 4000× 8% × 4

I = 4000× 0.08 × 4

I = 1280 dollars

coumpound interest is the interest is the interest from original principal and to it gets added on the interest before which compunds or continuosly adds over a period of time. When the problems gives a range of time(between months years, etc.), they asking for 
At the end of each year the interest earned is added to the original amount and the money is back in for profit.

 the interest will be computed as follow:

Interest at the end of the first year:

I = 4000× 0.08 × 1

I = 320 dollars

Your new principal per say is now 4000 + 320 = 4320

Interest at the end of the second year:

I = 4320× 0.08 × 1 and so on

Apr 16th, 2015

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