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I'm thinking of bonds when answering this question.
The more frequent the compounding the better it will be for the lender.
The less frequent the compounding the better it will be for the borrower.
Lets use this example:
Interest = 10%
Principle = $1000
Compounding A = Annually
Compounding B = Quarterly
Time period = 2 years
A) At the end of the first year $100 in interest would have been made making the balance $1100. At the end of the second year $110 would be earned because of compounding and the balance would be $1210.
B) At the end of the first year $103.81 in interest would have been earned with a ending balance of $1103.81. At the end of the second year the interest earned would be $114.59 and the ending balance would be $1218.40.
What I showed here is that if you are the one receiving the interest you would prefer daily compounding.
When you're paying out interest you would prefer simple interest.
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What is the monthly interest rate of and annual 10 percent rate?
It is 0.833... recurring % if the interest is simple, or compounded annually. If compounded monthly, it is approx 0.797 %
Would the statement 'Simple Interest is interest earned on interest' be True or False?
False. Interest upon interest is compounded interest
How do banks calculate simple interest?
The simple interest, on an amount Y, at rate r% per year, for t years is I = Y*(r/100)*t But bank interest is always compounded, never simple.
What is 3 percent of 100.00 per annum for 6 years?
If the 3% is "simple" interest, then the $100 earns an extra $18 in 6 years. If the interest is compounded yearly, then it earns $19.41 extra. If the interest is compounded weekly, then it earns $19.72 extra.
What is the simple interest paid on 3000 pounds at 3.5 percent yearly after 5 years and how much if the interest was compounded showing work for both answers?
Simple interest of £3000 over 5 years: 3000*0.035*5 = £525 Compounded interest of £3000 over 5 years: 3000*(1.035)^5 -3000 = £563.06 rounded to the nearest penny
What is the monthly interest rate of and annual 10 percent rate?
It is 0.833... recurring % if the interest is simple, or compounded annually. If compounded monthly, it is approx 0.797 %
Would the statement 'Simple Interest is interest earned on interest' be True or False?
False. Interest upon interest is compounded interest
How long does it take to get 40.00 on 8 percent interest with 2.00?
That depends on how the interest works.Is it simple interest ? Is it compound interest ?If compound, then how often is it compounded ?8% simple interest turns $2 into $40 in 237.5 years .8% compound interest, compounded quarterly, does the job in 37.8 years .As you can see, it makes quite a difference.
What is the monthly interest rate of 18 percent annually?
With simple interest, it is 1.5% per month. If compounded, it is 1.389% approx.
How do banks calculate simple interest?
The simple interest, on an amount Y, at rate r% per year, for t years is I = Y*(r/100)*t But bank interest is always compounded, never simple.
What is 3 percent of 100.00 per annum for 6 years?
If the 3% is "simple" interest, then the $100 earns an extra $18 in 6 years. If the interest is compounded yearly, then it earns $19.41 extra. If the interest is compounded weekly, then it earns $19.72 extra.
What is the simple interest paid on 3000 pounds at 3.5 percent yearly after 5 years and how much if the interest was compounded showing work for both answers?
Simple interest of £3000 over 5 years: 3000*0.035*5 = £525 Compounded interest of £3000 over 5 years: 3000*(1.035)^5 -3000 = £563.06 rounded to the nearest penny
What is the future value of 100000 dollars with 20 percent interest in 10 years?
Simple interest compounded annually and reinvested will yield 619173.64 before taxes.
What is the future value of 210000 with 4 percent interest in 8 years?
It depends on whether the 4% interest is per annum or for 8 years altogether. Also, you have to see if it is a simple interest or compounded interest.
The concepts of simple interest and compound interest and how these affected the results of your investment exercise?
Simple interest (compounded once) Initial amount(1+interest rate) Compound Interest Initial amount(1+interest rate/number of times compounding)^number of times compounding per yr
What will 10000 be worth after 5 years at 5 percent?
It makes a difference how often the interest is compounded, and you haven't given that information. If it's compounded annually, then your 10,000 becomes 12,762.82 after 5 years. If it's compounded quarterly, then it becomes 12,820.37 . If it's compounded "daily", then it becomes 12,840.03 . If it's "simple" (uncompounded) interest, then 10,000 swells to a full 12,500 in 5 years.
What type of interest is better to have when applying for a loan?
A+ Simple Interest
