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HELP! simple interest vs compound interest

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  • HELP! simple interest vs compound interest

    I'm having trouble with problems where the time is a fraction of a year and deciding whether to calculate present value/accumulation through simple interest or compound interest. It seems that for some problems, simple interest is the way, but for others, compount interest is the way as well. What is the general rule can one use for deciding which method to use? I basically decided if the problem says to use simple interest or if its using the dollar-weighted method, then use simple interest; otherwise always use compound interest. But I may be wrong. Can someone clarify what is the general rule to which method to use? Thanks!

  • #2
    As a rule, it's compound unless told otherwise.
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