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Topic: Simple interest
Replies: 3   Last Post: Jul 2, 2013 9:37 AM

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Robert Hansen

Posts: 7,184
From: Florida
Registered: 6/22/09
Re: Simple interest
Posted: Jun 30, 2013 7:59 PM
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Simple interest is "simply"...

Principle X Rate X Time

1000 * 0.06 * 6 = 360

As compared to "compound interest" which "compounds" the interest each period...

1000 * 1.06 * 1.06 * 1.06 * 1.06 * 1.06 * 1.06

1000 * 1.06 ^ 6 = 1419 (thus the interest is 419, compared to 360 when doing simple interest)

Note that simple interest involves multiplication and compound interest involves exponentiation.

Bob Hansen

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