2. What is the difference between compounding and simple
interest? (2 points)

Simple interest is calculated only on the principal amount, when compounded is calculated on the principal amount and the interests.

Explanation:

Hi, the difference between compounding and simple interest is that the simple interest is calculated only on the principal amount deposited, the original amount.  

A = P (1 + rt)

In the other hand, compounded interest is calculated on the principal amount and in the accumulated interests of the different periods (interest on interest)

A = P (1 + r/n) (nt)

n is the number of times that interest is compounded per unit t

answerembargo;