Sagot :
Answer:
Simple interest is the cost of using or borrowing money without compound interest or interest on interest. It's relatively easy to calculate since you only need to base it on the principal amount of money borrowed and the time period.
Simple interest works in your favor when you're a borrower because it keeps the overall amount that you pay lower than it would be with compound interest. However, it can work against you when you're an investor because you'll want your returns to compound as much as possible to get the most from your investment.
To understand how it works, it helps to look at some real-life situations in which simple interest is used.
Step-by-step explanation:
KEY TAKEAWAYS
Simple interest is what it costs to borrow money without compound interest— meaning there is interest on the principal and the interest.
Simple interest is calculated by looking at the principal amount borrowed, the rate of interest, and the time period it will cover.
Simple interest is more advantageous for borrowers than compound interest, as it keeps overall interest payments lower.
Car loans, amortized monthly, and retailer installment loans, also calculated monthly, are examples of simple interest; as the loan balance dips with each monthly payment, so does the interest.
Certificates of deposit (C D s) pay a specific amount in interest on a set date, representing simple interest.
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