These days financial bodies like banks use the Compound interest formula to calculate interest. Therefore if both simple and compound interests have the same rate the interest generated will always be higher when compounding. Simple Interest 4000 7 100 2.
The formula for compound interest looks like this.
In the formula for calculating compound interest the variables i and n have to be adjusted if the number of compounding periods is more than once a year. Compound interest includes the interest generated on the principal and the accumulated interest from any previous period. P Principal amount r Annual interest rate t Number of years interest is applied beginaligned textCompound Interest P times left. A P 1 rt A the amount of money accumulated after n years including interest P the principal.