Imagine investing 200$ at 4% interest. After 25 years, would you make more money using simple or compound interest?
Simple Interest:
A=P+P*r*n
A= 200+200*0.04*25
A=400
Compound Interest:
A=P(1+r)^9
A=200(1+0.04)^25
A=533.2
Thus, we can see that we make a lot more money using compound interest than simple interest.
Simple Interest:
A=P+P*r*n
A= 200+200*0.04*25
A=400
Compound Interest:
A=P(1+r)^9
A=200(1+0.04)^25
A=533.2
Thus, we can see that we make a lot more money using compound interest than simple interest.
That's bang on. In reality, do we compound our investments once a year or more? Ask someone, or look it up and tell the class what you find.
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