Simple Interest vs Compound Interest: Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus any previously earned interest.

Simple Interest Calculation: For multi-year periods, multiply the first year’s interest by the number of years. For example, £100 at 5% over 3 years earns 3 × £5 in total.

Compound Interest Growth: Compound interest increases each year because interest is added to the principal. The formula is: principal times (1 + interest rate) raised to the power of the number of years.

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