Compound Interest and Simple Interest maths guys in here

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Joined
22 May 2004
Posts
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Hi guys. Any maths guys in here. Am writing a program and need a bit of help with the maths

Simple interest is

I = (P*R*T)/100
Where
P Is the principal amount invested
R is the ammual rate of interest
T is the Period of investment in years
I is the simple interest Earned

So on this £100 invested
10% interest rate
1year

I come to £110 all together. So £10 interest

Now this is where i am cofused

Compound interest

A=P*(1+R/100)^T

where

P Is the principal amount invested
R is the ammual rate of interest
T is the Period of investment in years
A is the amount that the principal becomes after T years

But I get the same answer and is compund and simple interest not different. Im confused could someone explain it
 
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Joined
13 Jan 2005
Posts
10,708
Hi guys. Any maths guys in here. Am writing a program and need a bit of help with the maths

Simple interest is

I = (P*R*T)/100
Where
P Is the principal amount invested
R is the ammual rate of interest
T is the Period of investment in years
I is the simple interest Earned

So on this £100 invested
10% interest rate
1year

I come to £110 all together. So £10 interest

Now this is where i am cofused

Compound interest

A=P*(1+R/100)^T

where

P Is the principal amount invested
R is the ammual rate of interest
T is the Period of investment in years
A is the amount that the principal becomes after T years

But I get the same answer and is compund and simple interest not different. Im confused could someone explain it

Coumpound interest is where the interest is reinvested and becomes part of the principle for the following year. For the simple case where you're only talking about one year this is irrelevent, so both simple and compound yeild the same results.

Try the calculations again over 2, 3, 4 etc years, and you'll see the difference.
 
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