Simple interest vs Compund Interest-FIN 6404

Simple interest vs Compund Interest-FIN 6404 - Simple...

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Simple interest vs. Compound interest The difference between simple and compound interest is the difference between night and day. You will want to remember this simple rule: simple interest grows slowly, compounding speeds up the process. Simple interest is interest on the principle amount while compound interest is when your principle and any earned interest earned interest. If you have invested money into an account you always want compound interest. Moreover, the relative advantages of compound interest escalate as your holding period increases. An example might help simplify things. Suppose you have $100 to invest. You decide to invest it at the Hogg National Bank. It is a small bank located in the heart of Hazard County. You walk in and speak with the Boss. He says he will pay 10% simple interest on your $100. Not knowing he is up to something, you accept the offer and invest your $100. You are all excited and go home and start calculating how much you will have in the future. (Investing is
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This note was uploaded on 10/01/2011 for the course FIN 6404 taught by Professor P.ramanlal during the Spring '11 term at University of Central Florida.

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Simple interest vs Compund Interest-FIN 6404 - Simple...

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