11.3 Simple Interest and Compound Interest

Why does interest matter?

• a. To help you understand your bank statement

• b. To learn about saving and investing

• c. Both a and b

• d. None of the above

If you start with $100 in a savings account that offers 5% annual interest, how much would you have after 2 year with simple interest?

[Formula to find simple interest = P x R x T]

If you start with $100 in a savings account that offers 5% annual interest compounded annually, how much would you have after 2 years?

[Formula to find the amount received when using compound interest = P x (1+R)^T

What is the main advantage of compound interest over simple interest?

• It's easier to calculate

• It grows faster over time

• It's better for borrowers

• It's more common in banking

Which type of interest is generally better for debts and loans

• Simple Interest

• Compound Interest

• They are equally good for debts and loans

• It depends on the specific situation

Why is understanding the difference between simple and compound interest important?

• a. To make informed decisions about saving and investing

• b. To have a clearer picture of how your money is working for you

• c. Both a and b

• d. None of the above