Question 1

What is simple interest?

Accepted Answer

Simple interest is calculated on the original principal only, without compounding. The formula is: I = P × r × t, where P is principal, r is rate, and t is time.

Question 2

What is the difference between simple and compound interest?

Accepted Answer

Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest (interest on interest).

Question 3

When is simple interest used?

Accepted Answer

It is commonly used in short-term loans, promissory notes, basic savings accounts, and some fixed-term investments.

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