Answer to Question #160068 in Algebra for ....

Question

Why is is important in real-life to have a strong understanding of compound interest? Provide at least one future value example and at least one present value example. 

Answer 1

An excellent example of the use of compound interest would be the calculation and opening of your own deposit, for example, you decided to deposit $ 1000

on a deposit with an interest rate of 2.1 percent per annum, then in 10 years you will have $1000*(1+0.021) ^{10} = 1230$ dollars in your account. Therefore, compound interest is useful to know and use in real life.