# simple interest and compound interest

(a)  Briefly describe the difference between simple interest and compound interest. [3 marks]  (b)  How much would an investment of \$15,550 @ 8.3%/annum simple interest be worth after 4 years? Calculate the interest on this investment. [2 marks]  (c) How much would an investment of \$12,550 @ 9.2%/annum compound interest (compounded annually) be worth after 5 years? Calculate the interest on this investment.  [2 marks]  (d) How much would an investment of \$9,550 @ 5.3%/annum (nominal rate) compounded monthly be worth after three years and seven months? Calculate the interest on this investment.  [3 marks]  (e) Calculate the APR of an investment paying a nominal rate of interest of 8.7%/annum compounded weekly. [3 marks]  (f) If we invested \$13,550 at 5.3%/annum (nominal rate) compounded continuously for 15 months, how much would our investment be worth at the end of this period? [3 marks]  (g) Banks often charge customers interest based on daily compounding. Briefly outline why they do this. [4 marks] (h)  If  GBP1.0000 = USD1.6203 and annual interest rates in GB are 0.55% and  USA are 0.35%. Calculate the 7 month forward rate of exchange. [5 marks]

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