At the end of fifth year, in simple interest total amount will be 1400. In this case $1000 is the initial investment and $400 is the interest earned. In compound interest at the end of 5th year the total amount grows to 1469.33 which clearly shows that compound interest gives higher return on investment than the simple interest. It means that the simple interest is just the interest earned on initial investment whereas compound is interest on interest.
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