Reviewed by Caitlin Clarke Fact checked by Suzanne Kvilhaug Simple Interest vs. Compound Interest: An Overview Interest is ...

Simple interest is computed annually on the principal balance at the start of the period, while compound interest can be accrued at any time interval. Focusing on savings and investments ...

Simple interest is often used in a loan or bond context wherein the interest is the same every period, and there is no compounding. Compound interest is used in investment and savings contexts.

After this initial simple interest ... It’s generally difficult to compound at a high rate with interest-only investments, but investors can also take advantage of compounding by investing ...

In other words, this formula can only be used for investments that earn compound interest, not simple interest. With simple interest, you only earn interest on the principal amount you invest.

The Rule of 72: A quick way to estimate growth The Rule of 72 is a simple formula to estimate how long it will take for your investment to double. Just divide 72 by your annual interest rate.

Investing money generates interest too. As the investment generates interest, its value increases. Simple interest close simple interestInterest calculated as a percentage of the original amount.