Many students and practitioners are confused with the difference between simple interest and compound interest. Simple interest does not consider interest on interest while compound interest does. It is a good idea to represent them with a graph. For instance, we borrow $1,000 today for 10 years with an annual interest of 8 percent per year. What are the future values if 8 percent is the simple interest and compounded interest rate? The formula for payment of a simple interest rate is as follows:

The future value for compounded interest is as follows:

Here, PV is the load we borrow today, that is, present value, R is the period rate, and n is the number of periods. Thus, those two future values will be $1,800 and $2,158.93. The following program offers a graphic representation of a principal, simple interest payment, and the future values:

import numpy as np
from matplotlib.pyplot import *
from pylab import *
pv=1000
r=0.08
n=10
t=linspace...