Which describes the difference between simple and compound interest?

Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans.

Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.

Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans.

Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.

Question

Social Studies

Frederick Floyd

18 October, 19:30

Which describes the difference between simple and compound interest?

Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans.

Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.

Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans.

Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.

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Answers (1)

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Seamus Calderon · Answer 1

The correct answer is Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.

This means that the simple one is basically paying more than what you took, while the compound one has you not only pay interest for what you originally borrowed, but also pay interest on the accumulated interest of the debt.