## 2.1 Simple and Compound Interest

Note: the formulas used in this topic describe the simplest form of these systems. Future notes will analyse situations involving regular withdrawals or additions.

### Simple Interest

**Simple interest**describes a system that increases or decreases by**a fixed amount**after each period of time. That amount is calculated as a percentage of the initial value of the system.- Graphs for this type of system are
**linear**. - This type of system can be modelled using the following
**recursive formula**:

A_{n+1}=I A_{0}+A_{n}

Where I is the interest rate as a decimal, A_{0} is the initial value and A_{n} is the value after n periods of time.

- A
**non-recursive formula**can also be used: