Question

An investment may earn interest using a simple interest rate or a compound interest rate. This expression can be used to find the value of an investment that is earning simple interest: P(1 + rt)This expression can be used to find the value of an investment that is earning compound interest: P(1 + r)^t Use the drop-down menus to complete the statements about simple and compound interest.

Answer 1

To determine the worth of an investment paying simple interest, use the following expression: P(1 + rt) and To determine the value of an investment producing compound interest, use the following expression: P$(1+r)^{t}$.

The daily interest rate, the principle, and the number of days between payments are multiplied to calculate simple interest. Although some mortgages employ this calculating approach, this kind of interest often relates to vehicle loans or short-term loans.

The yearly interest rate is raised to the number of compound periods minus one, and the starting principal amount is multiplied by both of these factors. The resultant value is subsequently deducted from the loan's entire original amount.

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