A person deposits $100 at the beginning of each year for 20 years. Simple interest at an annual rate of i is credited to each deposit from the date of deposit to the end of the twenty year period. The total amount thus accumulated is $2840. If instead, compound interest had been credited at an effective annual rate of i, what would the accumulated value of these deposits have been at the end of 20 years

Future value if compounding interest: $3,096.9202

Explanation:

The simple interest do not consider that interest generate more interest like compounding. It considers the investor withdraw their return rather than reinvesting.

100 x 20 x (1 + i x (20+1)/2) = 2,840

(2,840/2,000 -1) x 2 / 21

r = 0.04

Now, we solve considering compounding which assume all interest are reinvested.

C100.00

time20

rate0.04

FV$3,096.9202

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.