The Economics of Money and Banking Chapter 4 Interest and Interest Rate >>Types of Interest Rates 1 A:Simple and compound interest Interest Rate Compound interest involves earning interest in addition to the interest Understanding Interest and earned on the principal or initial investment Total future amount principal *(1+rate)n 8 GUO YING SEM TONGJI UNIVERSITYThe Economics of Money and Banking 8 GUO YING SEM TONGJI UNIVERSITY 1 Types of Interest Rates Compound interest involves earning interest in addition to the interest earned on the principal or initial investment  Total future amount = principal * ( 1+ rate) n Chapter 4 Interest and Interest Rate Interest Rate Understanding Interest and A: Simple and compound interest