1. Over 20 years, would you prefer 10% per annum, with interest compounding, or 15% per annum but without interest compounding? (That is, you receive the interest, but it is put into an account that earns no interest, which is what we call simple interest.)
2. A project returned +30%, then -30%. Thus, its arithmetic average rate of return was 0%. If you invested $25,000, how much did you end up with? Is your rate of return positive or negative? How would your overall rate of return have been different if you first earned -30% and then +30%?