Question:
what does compounded annually means??? and what is the difference between simple interest and compound interest..???
Answer:
compounded annually means the interest is calculated yearly.
The amount after the first unit of time becomes the principle for the second unit.
Simple interest is calculated by multiplying the principal amount by the interest rate and the number of periods in a loan.
Simple interest = (Principal * Rate of interest * Time)/100
compound interest is calculated by multiplying the principal amount by one plus the annual interest
rate raised to the number of compound periods minus one.
Compound interest = Principal * (1 + Rate of interest/100)Time - Principal
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