Compound Interest Formula and Compounding Continuously

Compound Interest Formula and Compounding Continuously

Assessment

Flashcard

Mathematics

10th - 12th Grade

Hard

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15 questions

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1.

FLASHCARD QUESTION

Front

What is the formula for compound interest compounded semi-annually?

Back

The formula is: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years the money is invested or borrowed.

2.

FLASHCARD QUESTION

Front

What does 'compounded continuously' mean in terms of interest calculation?

Back

Compounding continuously means that the interest is calculated and added to the principal at every possible moment. The formula used is A = Pe^(rt), where A is the amount of money accumulated after time t, P is the principal amount, r is the annual interest rate (as a decimal), and e is Euler's number (approximately 2.71828).

3.

FLASHCARD QUESTION

Front

If Karla invested $1,000 at an interest rate of 6.75% compounded semi-annually, how would you express this in an exponential equation?

Back

The equation would be: A = 1000(1 + 0.0675/2)^(2*15).

4.

FLASHCARD QUESTION

Front

What does the variable 'r' represent in the compound interest formula?

Back

The variable 'r' represents the annual interest rate expressed as a decimal.

5.

FLASHCARD QUESTION

Front

How many times a year does interest compound if it is compounded quarterly?

Back

Interest compounds 4 times a year if it is compounded quarterly.

6.

FLASHCARD QUESTION

Front

What is the initial amount of money if the final amount is given by the formula A = 3250e^(0.062*8)?

Back

The initial amount of money deposited is $3250.

7.

FLASHCARD QUESTION

Front

Convert 6.5% to a decimal.

Back

6.5% as a decimal is 0.065.

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