Q : Write shot note while differentiating the following. i): simple interest VS compound interest. ii): Present VS future value iii): Annuity due VS Ordinary Annuity.
Q : Write shot note while differentiating the following.
i): simple interest VS compound interest.
ii): Present VS future value
iii):
iv): Amortization Schedule
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i)
Simple interest:
As the name indicates it is a simple interest computed on the amount of principal. Interest on interest might not be computed, which means it do not have any impact of compounding. The situation when the interest is not received on interest is called as simple interest.
Compound interest:
Compound interest is the accumulation of interest to the principal amount of a credit or deposit, or in simple sense, interest on interest. It is the outcome of reinvesting interest, somewhat than disbursing it out, therefore that interest in the subsequent period is then received on the principal amount plus formerly accrued interest.
Compound interest is interest calculated on the initial principal amount, which similarly includes all of the accumulated interest from preceding periods on a credit or deposit.
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