Compound interest is earned on both the principal amount and previously earned interest, so it grows faster than simple interest. With simple interest, only the principal earns interest each period at a fixed rate, so the interest amount decreases as the balance is paid down. The key difference is that with compound interest, interest is added to the account and earns additional interest, whereas with simple interest only the original principal earns interest each period.

1. Interest: Compound & Simple Neema Smith

4. Example... $4,695.8 $ 175.35 $ 28.58 12 $4,871.15 $ 175.35 $ 28.58 11 $5,046.5 $ 175.35 $ 28.58 10 $5,221.85 $ 175.35 $ 28.58 9 $5,397.2 $ 175.35 $ 28.58 8 $5,572.55 $ 175.35 $ 28.58 7 $5,747.9 $ 175.35 $ 28.58 6 $5,923.25 $ 175.35 $ 28.58 5 $6,098.6 $ 175.35 $ 28.58 4 $6,273.95 $ 175.35 $ 28.58 3 $6,449.3 $ 175.35 $ 28.58 2 $6,624.65 $175.35 $28.58 1 Balance Principal Interest Month

6. Example… $4,646.42 $183.63 $20.30 12 $4,830.05 $182.87 $21.07 11 $5,012.92 $182.10 $21.84 10 $5,195.02 $181.34 $22.60 9 $5,376.36 $180.58 $23.36 8 $5,556.94 $179.82 $24.11 7 $5,736.76 $179.07 $24.87 6 $5,915.83 $178.32 $25.62 5 $6,094.15 $177.57 $26.36 4 $6,271.72 $176.83 $27.11 3 $6,448.56 $176.09 $27.85 2 $6,624.65 $175.35 $28.58 1 Balance Principal Interest Month