Given a choice between the 2 different types of interest, which will you choose? This is taught under Elementary Mathematics (E-Math)
Before you make the smart choice, let's examine the differences between these 2 different types of interest through an example.
CASE OF SIMPLE INTEREST
alwaysLovely deposited $1000 into Bank A for 2 years which pays a simple interest of 10% p.a.( per annum --> per year). How much will she get at the end of 2 years?
1 year -->10% , 2 years --> 20%
Total interest earned for 2 years = 1000 * 20% = $200
Total amount = $1000 + $200 = $1200
CASE OF COMPOUND INTEREST
alwaysLovely deposited $1000 into Bank B for 2 years which pays a compound interest of 10% p.a. How much will she get at the end of 2 years?
Interest earned in Year 1 = 1000 * 10% = $100
Principal Amount for Year 2 = $1000 + $100 = $1100
Interest earned in Year 2 = 1100 * 10% = $110 /*Interest is calculated based on the new principal amount*/
Total amount received for 2 years = $1000 + $100 + $110 = $1210
So which is better, Bank A or Bank B ?
Check out the next post on Formulae Usage on Simple And Compound Interest which will reduce your time to reach your correct answer.
Ai Ling Ong
Hi, I'm Ai Ling Ong. I enjoy coaching students who have challenges with understanding and scoring in 'O' Level A-Maths and E-Maths. I develop Math strategies, sometimes ridiculous ideas to help students in understanding abstract concepts the fast and memorable way. I write this blog to share with you the stuff I teach in my class, the common mistakes my students made, the 'way' to think, analyze... If you have found this blog post useful, please share it with your friends. I will really appreciate it! :)
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