Compare Interest

Front

What is the decimal representation of 4.1%?

Back

0.041

Front

What is the formula for calculating 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 interest is compounded per year, and t is the number of years.

Front

What is the difference between compound interest and simple interest?

Back

Compound interest is calculated on the initial principal and also on the accumulated interest from previous periods, while simple interest is calculated only on the principal amount.

Front

How do you convert months to years?

Back

Divide the number of months by 12.

Front

If you invest $800 at 6% simple interest for 10 years, how much interest will you earn?

Back

Interest = Principal x Rate x Time = $800 x 0.06 x 10 = $480.

Front

What is the value of an investment of $5,000 at 4% interest compounded annually after 3 years?

Back

A = 5000(1 + 0.04)^3 = $5,000(1.124864) = $5,624.32.

Front

What is the total amount in an account after 10 years if $800 is invested at 6% compounded annually?

Back

A = 800(1 + 0.06)^10 = $800(1.790847) = $1,432.68.

Front

What does it mean for interest to be compounded annually?

Back

It means that the interest is calculated and added to the principal once every year.

Front

How do you calculate the total amount in an account with simple interest?

Back

Total Amount = Principal + Interest, where Interest = Principal x Rate x Time.

Front

What is the value of a $8,000 investment at 4.1% interest compounded annually after 4 years?

Back

A = 8000(1 + 0.041)^4 = $9,394.92.