# Financial Maths: Use simple and compound interest to explain and define a variety of situations

### Subject outcome 5.2

Use simple and compound interest to explain and define a variety of situations.

### Learning outcomes

• Differentiate between simple and compound interest.
• Explain the advantages and disadvantages of using simple and compound interest in specific situations.
• Use and manipulate the simple growth formula $\scriptsize A=P(1+in)$ to solve problems.
• Use and manipulate the compound growth formula $\scriptsize A=P{{(1+i)}^{n}}$ to solve problems subject to only annual compounding being made.

### Unit 1: Simple and compound interest

By the end of this unit you will be able to:

• Differentiate between simple and compound interest and extrapolate the advantages and disadvantages of each in specific situations.
• Calculate simple and compound interest over different periods at specific rates.
• Do calculations using computational tools efficiently and correctly and verify solutions in terms of the context.
• Use solutions to calculations effectively to define the changes that occur over a period.