- Simple interest uses a linear model, while compound interest uses a non-linear, exponential model.
AIf a $500 loan is taken out at a 4% interest rate compounded annually, calculate the value of the loan with interest after 1, 2, 3, 4, 5 years.
BWhat simple interest rate would you need to use to have the same loan value after 1 year?
CWhat simple interest rate would you need to use to have the same loan value after 5 years?
DSimple interest is normally used in the real world for loans investments with short durations. Based on your work in this question, comment on if this is an appropriate practice and justify why you think people do this.
AIf a $500 loan is taken out at a 4% interest rate compounded annually, calculate the value of the loan with interest after 1, 2, 3, 4, 5 years.
BWhat simple interest rate would you need to use to have the same loan value after 1 year?
CWhat simple interest rate would you need to use to have the same loan value after 5 years?
DSimple interest is normally used in the real world for loans investments with short durations. Based on your work in this question, comment on if this is an appropriate practice and justify why you think people do this.