1. Simple & Comp'd Interest
Simple interest: interest rate applies to
principal only %
Comp’d interest: interest rate applies to
principal and accrued interest

2. Solution: Example: Determine the amt available
in 3 years if $ 10,000 is deposited now
at 20% per year (a) simple and,
(b) Compound interest
Solution:
(a) Simple interest
F = principal + interest
= P + P(n)(i)
= 10, ,000(3)(0.20)
= $16,000

3. Solution: Example: Determine the amt available
in 3 years if $ 10,000 is deposited now
at 20% per year (a) simple and,
(b) Compound interest
Solution:
(b) Comp’d interest
F1 = 10,000+10,000(0.20) = 12,000
F2= 12,000+12,000(0.20) = 14,400
F3= 14,400+14,400(0.20) = $17,280