Explain how compound interest is different from simple interest.

Simple interest is based on principal amount of loan, while the compound interest is based on principal amount plus interest rate accumulated in each period.

Explanation:

Simple interest is calculated on the basis of the principal amount of the loan. While the compound interest is calculated on the basis of principal amount and the interest that is accumulated in each period.  

So understanding and calculating simple interest are relatively easier than compound interest. Simple interest is better in case of borrowing or mortgages and car loans etc. Compound interest is better in case of investment as it helps the fund to grow at a faster rate.

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answer; importance to people; or acceptance;