Extended data:
Simple interest refers to the interest calculated according to the fixed principal, which is a method of calculating interest. The calculation of simple interest depends on the amount (principal) of the loan, the borrowing time of the funds and the general interest rate level in the market. According to the simple interest calculation method, as long as the principal receives interest within the loan period, no matter how long it takes, the generated interest will not be added to the principal to recalculate the interest. Compound interest refers to the interest-bearing method of calculating the interest generated in the previous interest-bearing periods in the next interest-bearing period in addition to the interest generated by the fund principal.
The difference between simple interest and compound interest:
1, the result of interest will be different.
The interest result of compound interest will be higher; The interest result of simple interest is lower. At the same interest rate level and the same principal, compound interest will be higher than simple interest in the result of calculating interest with simple interest and compound interest. Simple interest refers to the calculation of interest according to fixed principal. Compound interest means that after the interest is generated in the first period, the second principal includes the principal and the interest generated in the first period. The longer the duration, the greater the difference between these two values.
2. The calculation method of interest is different.
Simple interest only uses the principal to calculate interest; Compound interest will be settled regularly, and the interest will be added to the principal and accumulated in installments. That is, under the simple interest calculation method, the interest during the maturity period does not participate in interest calculation. In the calculation of compound interest, interest is calculated according to the agreed interest period, and compound interest is also called rolling interest.
3, the calculation formula is different
The calculation formula of simple interest is: interest (I)= principal (P)× interest rate (i)× number of interest-bearing periods (n). For example, I have 10000 yuan and want to deposit it for 2 years, with an annual interest rate of 3.25%; The interest after two years is: 10000*3.25%*2=650 yuan.
The formula of compound interest is: s = p * (1+I) n,10000 * 3.25% * 2+10000 * 3.25% = 650 yuan +2 1.65438. Where 10000 * 3.25% * 3.25% = 21.125 yuan is the interest in the first year, that is, the interest generated in the second year is10000 * 3.25%.
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