FLASHCARD#9 12TH 4TH

Front

What does the 'r' stand for in the formula for compound interest?

Back

Rate

Front

What does the 'n' stand for in the formula for compound interest?

Back

The number of times compounded per year

Front

If Courtney saved $2,200 at 5.2% interest compounded daily, how much will she have in 4 years?

Back

$2708.63

Front

What is the meaning of 'annually' in terms of compounding frequency?

Back

1 time per year

Front

What is the formula for compound interest?

Back

A = P(1 + r/n)^(nt) where A is the amount, P is the principal, r is the rate, n is the number of times compounded per year, and t is the time in years.

Front

If Karla invests $1,000 at 6.75% compounded semi-annually, what is the formula to find her amount after 15 years?

Back

A = 1000(1 + 0.0675/2)^(2*15)

Front

What is the principal amount in a compound interest problem?

Back

The initial amount of money invested or borrowed.

Front

What does 'compounded daily' mean?

Back

Interest is calculated and added to the principal every day.

Front

How do you calculate the total amount after 4 years if the interest is compounded annually?

Back

Use the formula A = P(1 + r)^t.

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus any interest earned.