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Q: Does banks charge simple or compound interest on overdraft?
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Is the interest accrued on a student loan simple or compound interest?

its compound interest


Does the amount of interest earned each year increase decrease or stay the same in a simple interest account What about in a compound interest account?

Simple interest: stays the same. Compound interest: increases.


Is simple or compound interest faster?

Calculation of simple interest is faster in comparison to compound interest. In the latter, interest is added up with the principal amount and interest is charged on that added amount in the next period calculation.


What is the similarity between simple interest and compound interest?

Simple interest is calculated on the principal only. If you have $1,000 and earn 5% interest per year, you will receive $50 at the end of year one. At the end of year two, you will receive another $50. And on it goes. With compound interest, you earn interest on the principal plus any interest you previously earned. Looking again at the previous example, at the end of year one you will still receive $50. At the end of year two, however, you will receive $52.50. Why? Because the 5% is paid on the principal PLUS the interest you previously earned. At the end of 10 years, you'll receive $77.57. After 20 years, $126.35. With simple interest you would still receive only $50.


What would be the simple interest if the compound interest on the same sum for 2 years at 4 percent be Rs 408?

Interest = Rs 408 so capital = 5000. So the simple interest would be 5000*4/100*2 = Rs 400.