Simple Interest vs. Compound Interest

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What is the main difference between simple interest and compound interest?

Simple interest remains constant throughout the term, while compound interest is computed on the principal and also on the accumulated past interest.

Who is the person (or institution) who invests the money or makes the funds available?

Lender or creditor

What does 'origin or loan date' refer to?

Date on which money is received by the borrower

What does 'maturity value or future value' represent?

Amount after t years that the lender receives from the borrower on the maturity date

How is 'time or term (t)' defined in the context of borrowing and investing?

The amount of time in years the money is borrowed or invested

What does 'rate (r)' represent in the context of borrowing and investing?

Annual rate charged by the lender

What does 'principal (P)' refer to in borrowing and investing?

Amount of money borrowed or invested on the origin date

Test your knowledge about simple interest and compound interest, and learn about the roles of lenders and borrowers in financial transactions.

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