What is the difference between simple interest and compound interest?

What is the difference between simple interest and compound interest? 

Ans. Simple vs. compound interest is not hard to understand. Basically, simple interest is interest paid on the original principal only However, compound interest is the interest earned not only on the original principal, but also on all interests earned previously In other words, at the end of each year, the interest earned is added to the original amount and the money is reinvested Example of Simple vs. Compound Interest 

Simple Interest: First year: $1,000 × 1 year × 10% = $100 in interest Second year: $1,000 × 1 year × 10% = $100 in interest Total Interest: $200 Total of the principal amount plus interest = $1,200 In this scenario, the total amount of interest paid over the life of the loan would be $200 

Compound Interest: First year: $1,000 × 1 year × 10% = $100 in interest Second year: $1,100 × 1 year x 10% = $110 in interest Total Interest: $210. Total of the principal amount plus interest = $1,210 In this scenario, with interest compounded annually, the total amount of interest paid is $210.