1.

Describe the difference between simple and compound interest. What types of
functions are used to model both types of interest?

SIMPLE INTEREST CALCULATES INTEREST ON THE ORIGINAL BASE AMOUNT,

COMPOUND INTEREST CALCULATES INTEREST ON THE BASE AMOUNT PLUS ANY
ACCRUED INTEREST TO DATE. F(X)=MX+B FOR SIMPLE INTEREST (N)=ABX FOR
COMPOUND INTEREST
2.

Many banks offer savings and checking accounts that can be linked and have money
transferred from one to the other easily. Describe how this would benefit you.

THIS IS BENEFICIAL TO MOVE FUNDS FROM SAVINGS TO CHECKING AND FROM

CHECKING TO SAVINGS. IF FUNDS ARE LOW IN THE CHECKING ACCOUNT, IT IS
EASY TO TRANSFER MONEY FROM SAVINGS TO CHECKING TO AVOID
OVERDRAFTS. LIKEWISE, IF AMPLE FUNDS EXIST IN CHECKING ACCOUNT, THE
FUNDS CAN BE EASILY TRANSFERRED TO SAVINGS, WHERE GREATER INTEREST
CAN ACCUMILATE IN SAVINGS RATHER THAN IN CHECKING ACCOUNT (TYPICALLY).
3.

APR and APY are important concepts in this lesson. Describe the difference between
the two. How does compound interest come into play?

APR IS ANNUAL PERCENTAGE RATE REFERS TO AMOUNT PAID TO A FINANCIAL

INSTITUTION BY A BORROWER FOR INTEREST. IT IS A NORMALIZED RATE BUT IS
BASED ON COMPOUND INTEREST TO ESTABLISH THE NORMALIZED RATE.
APY IS ANNUAL PERCENTAGE YIELD BASED ON COMPOUND INTEREST FOR ONE
YEAR.