Compound interest

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The time (in years) for which the money is invested or borrowed.

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In the context of compound interest, what does 'n' represent when interest is compounded semi-annually?

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The number of times interest is compounded per year; for semi-annual compounding, n=2.

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What is the formula for calculating compound interest when compounded continuously?

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If you invest $5,000 at an interest rate of 3.75% compounded monthly for 25 years, what is the future account balance?

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$12,749.30.

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False.

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What is the difference between simple interest and compound interest?

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Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest that has been added.

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Define compound interest.

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Interest calculated on the initial principal and also on the accumulated interest from previous periods.

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What is the formula for calculating the future value of an investment with compound interest?

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If an investment of $1,000 earns 6.75% interest compounded semi-annually, how many times is the interest compounded in one year?

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2 times.

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What does the term 'principal' refer to in the context of compound interest?

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The initial amount of money invested or borrowed before interest.