# Treat simple interest as being earned continuously so

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treat simple interest as being earned continuously, so thata(t) is a continuousfunction. The following graph includes plots for both the step function and thecontinuous function.Simple interest: ( )(1)a ti t( )(0) 1A tAi ta(t)earnedcontinuouslyearned at endof each yeart
Module 1 – Interest Rates and the Time Value of MoneyPage M1-9The following graph compares the growth of 2 investments. In each case, anamount of 1 is invested at time 0. One investment earnssimpleinterest at a60% annual rate; the other earnscompoundinterest at a 60% annual rate.ta(t)CompoundInterestSimpleInterest
ACTEX LearningExam FM – Financial MathematicsDinius, Hassett, Ratliff, Garcia, & Steeby
Page M1-10Module 1 – Interest Rates and the Time Value of MoneySection 1.4Effective Rate of Interest.1
ACTEX LearningExam FM – Financial MathematicsDinius, Hassett, Ratliff, Garcia, & Steeby
Exercise(1.10)Let the interest rate be 6% and the time interval be [2,3].Find2,3ifor a) compound interest at 6%, and b) simple interest at 6%.

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