General · Unit 3 → 4 · simple vs compound

Add a constant, or multiply?

Simple interest grows by the same dollar amount each year. Compound interest multiplies — step year by year and watch the gap open.

Simple · An = A₀ + nI

Compound · An = A₀ Rn

Year Simple Compound Gap

Shared start

$10k
8%
10y

Grow year by year

n0

Working