Understanding Simple and Compound Interest EXAMPLE EXERCISES Determine if each situation represents simple or compound interest. Identify principle, interest rate, length of time, and number of compounds where applicable. Do not attempt to calculate as you may not be given all information in each exercise. 1. Juan is planning to buy a used car for $5700 from a dealership that will have him make payments biweekly when his paychecks come in at 6.5% interest per year. 2. Sally is investing $1000 into a 12-month CD at the bank with an annual rate of 2.5%. 3. Aaron is starting a traditional savings account with $2000 that earns 1% yearly. 4. Mercedes agrees to loan her sister $1000 with the agreement that she pays her back an additional 5% by the end of the year. 5. Jordan uses a credit card to buy a new TV for $1500