## How to Solve Advanced Compound Interest Questions on the GMAT

*Posted on on April 13, 2015*

We have discussed simple and compound interest in a previous post.

We saw that simple and compound interest (compounded annually) in the first year is the same. In the second year, the only difference is that in compound interest, you earn interest on previous year’s interest too. Hence, the total two year interest in compound interest exceeds the two year interest in case of simple interest by an amount which is interest on year 1 interest.