If you needed a $1,000 loan, would it be best if it was compounded monthly, annually,...
If you needed a $1,000 loan, would it be best if it was compounded monthly, annually, or simple interest with no compounding? Explain with complete sentences.
Homework Answers
Answer:
If we needed a $1,000 loan, it would be best if it was simple interest with no compounding
Explanation:
In case if it was compounded monthly, every month the interest is added to the principal amount and the interest for the next month is calculated on the added amount. In this way, the loan amount grows maximum. So,compounding monthly is most undesirable.'
In case if it was compounded annually, every year the interest is added to the principal amount and the interest for the next year is calculated on the added amount. In this way, the loan amount grows but slightly less than compounding monthly.. So,compounding annually is undesirable.'
In case if it was simple interest, The principal amount remains as $1,000 through out and only interest is calculated every year.In this way, the loan amount grows minimum So,simple interest is desirable.'
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