Compound interest loans and investments: recurrence relations and the effective annual rate

What this note covers

1. What compound interest is
2. Getting the period rate and the number of periods right
3. Building and using the recurrence relation
4. The geometric sequence link and the closed form
5. Investigating the effect of rate and compounding frequency
6. The effective annual rate of interest
7. Using the effective rate to compare loans and investments
8. How this is examined in the WACE ATAR course examination

8 sections · 12 key terms & formulas · 6 common mistakes