Simple and Compound Interest

Front

What is the simple interest formula?

Back

I = P • R • T

Front

How can you find the time in years if given the time in months?

Back

Divide the months by 12.

Front

What best describes 'compounding'?

Back

When an amount of interest is added to the Principal.

Front

How much simple interest will Mr. Thomas earn in 3 years if he invests $1,500 at 3.4%?

Back

$153

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 interest is compounded per year, and t is the time in years.

Front

What is the difference between simple interest and compound interest?

Back

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

Front

If you invest $450 at 10% compound interest for 3 years, what is the final amount?

Back

$463.63

Front

What does 'Principal' mean in the context of interest?

Back

The initial amount of money invested or borrowed.

Front

What does 'Rate' refer to in interest calculations?

Back

The percentage of the principal charged as interest per time period.

Front

What is 'Time' in the context of interest calculations?

Back

The duration for which the money is invested or borrowed, usually expressed in years.