Question

Hello, I ran into a conceptual question in a lecture and it said the following was possible: That simple interest and compound interest can be the same over several periods. How is this so?

Answer 1

Answers page-1 * According to Information 1. The interest may be compounded yearly half-yearly or quarterly based on the internal policy / norms of the banks of the firms. - within this internal (from the beginning to the 1st point of compounding time) the compound interest and the simple intrest are the same it's better to discuss an example. Let, the interest get compounded half-yearly. .e., after each of 6 monthly at the rate c%.

Page - 2 Let the principal amount = 100 then after 5 month the interest is, x5 (simple interest) -2.5 nt Total = 100+25= 102.5 But for the compound interest = = 100(1+0,6):A = P(1+) * where, n= number of times compounded in a year t = no of years = 102.494 ~102.5 = simple interest. The happens since the principal amount increases only after the arrival of the 1st compounding period.