Question 1131240: A=P+P*r*t
What order would I do this in?
where A is the Amount (total principal plus interest) required to repay the loan, P is the Principal, r is the annual interest rate (quoted as a percent, but used as a decimal), and t is the time in years.
Complete the table below with the amounts you would have if you invested $1,000 at 7% interest with simple interest and with interest compounded annually.
Year Simple Interest Compound Interest
1yr $______________ $____________
2yr $_______________ $____________
3yr $______________ $_____________
4yr $______________ $_____________
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! the simple interest formula is f = p + p * r * n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time period.
f is the same as A in your formula.
n is the same as t in your formula.
the compound interest formula is f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.
your problem statement is:
Complete the table below with the amounts you would have if you invested $1,000 at 7% interest with simple interest and with interest compounded annually.
when solving these problems:
p = 1000
r = .07 per year
n = number of years
you apply these formula as shown in the following example for when n = 4.
when n = 4:
f = p + p * r * n becomes f = 1000 + 1000 * .07 * 4 = 1280 (simple interest)
f = p * (1 + r) ^ 4 becomes f = 1000 * (1 + .07) ^ 4 = 1310.79601 (compound interest)
all the solutions are shown below.
Year Simple Interest Compound Interest
1yr $______2070________ $_____1070_______
2yr $______1140________ $_____1144.9_____
3yr $______1210________ $_____1225.043___
4yr $______1280________ $_____1310.79601_
as n gets larger, the difference between compound interest formula and simple interest formula becomes greater and greater in favor of compound interest formula.
this is because you are earning interest on interest with the compound interest formula while you are only earning interest on the original principal with simple interest formula.
the compound interest formula is the equivalent of taking what you earned each year and then adding it to the principal in your account for the following year.
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