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How much more money would I have if I invested $14,000.00 for 8 years at 6.4% in an account that compounded annually rather than in an account that just earned simple interest? Why is this?
15 years ago

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drwls
With annual compounding you would have
14,000*(1.064)^8 = 22,996.46

With simple interest you end up with
14,000*[1+(.064)*8] = 21,168.00

With simple interest, you do not earn interest on the interest that you (the investor) should have collected during the term of the deposit, but which the bank kept.
15 years ago

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