The difference between the two is that simple interest is a fixed amount of interest. 3 Mary deposits 10000 in an account which pays 56 compound interest per year. In the next time period we then take this new value unlike simple interest and increase it by the same percentage and so on.
This is called the future value of the investment and is calculated with the following formula.
Maths revision video and notes on the topic of Compound Interest and Depreciation. Examples Calculate the interest on borrowing 40 for 3 years if the. Maths revision video and notes on the topic of Compound Interest and Depreciation. Put simply compound interest changes the amount of money in the bank each time and a new calculation has to be worked out.