The difference in money between compound interest and simple interest is 144196 - 1280 16196. If a sum of money produces 3900 as interest in 3 years and 3 months at 16 per year simple interest find the principal. In simple words Simple interest represents a fee that you pay on a loan or income that you earn on deposits.
To calculate the amount of simple interest over 5 years you simply multiply the interest earnt in year one by five - 125 5 625.
This is the amount that Mr. Pay the same amount of interest every year. A 3-year loan of 1000 at 10 costs 3 lots of 10 So the interest is 3 1000 10 300 Simple interest is almost never used in the real world with compound interest being preferred. Alex pays Interest of 1000 10 x 2 Years 200.