financial maths

Question 1

define the formula for simple interest

Answer 1

i = p × r × t
interest = principal x rate of interest x time

Question 2

describe the formula for compound interest

Answer 2

a = ( r ) t
p ( 1 + —– )
( 100 )

amount of interest = principal ( 1 + rate of interest ) time
( ——————– )
( 100 )
time in years