Question

If you were to invest $1000 for 3 years would you rather receive simple interest or compound interest for your investment? why?

Answer 1

When Investing it is beneficial to receive compound Interest on Investment rather than Simple Interest. As in simple interest, Interest is computed on Investment amount while in compounding Interest you receive Interest on Interest along with interest on Investmnet amount.

In compounding Interest, Interest is added to Investment amount after a compounding period(like 3 months, 6 months or yearly are known are compounding periods depending upon what you choose). The next Interest you earn in next compounding period will be computed on Investmnet plus the interest you already earned. Thus, in compounding you earn interest on interest will increases our future value of investmnet.

In simple Interest, interest is computed only on Investment value and it does not consider interest on interest.

hence, it is beenficial to receive compound interest for your investment