Answer to Question #108669 in Financial Math for Paddy

Question

Calculate the difference between the simple interest and the compound interest if R3 400 is invested at 10,5% p.a. for 6 years

Answer 1

Simple interest:

$S=P(1+i\times n)=3400(1+0.105\times6)=5542$

Compound interest

$S=P(1+i)^n=3400(1+0.105)^6=6 189.36$

$\Delta=6189.36-5542=$ 647.36