I was recently calculating compound interest for one of my questions and I came to one quite intruiging problem
so from what I understand simple interest is! when you have the same amount of interest every year so e.g Principal amount is $100$ and rate is $10\%$ then every year you get $10$.
Compound interest on other hand is when you get interest on the new value e.g. Principal amount is $100$ and rate is $10$ then first year you get $10$ interest second year you get $\$11$ interest etc and so on!
Now for the question I was working on! Principal amount is $\$11,000$ and the rate is $12\%$ compounded quarterly for 5 years.
So Simple interest would be $\text{Interest} = \text{PRT}= \$11000\cdot0.12\cdot20= \$26400$
And compound interest would be! $\text{Interest} = \$11000(1+ \frac{0.12}4)^{20}$ that is $= \$19,867.22$ HOW?? HOW is compound interest less than Simple interest while the interest each quarter for compound interest is larger than the simple interest????