Simple and Compound Interest

Front

What does the 'I' in the interest formula stand for?

Back

Interest

Front

The rate is given as a percent (%). Before using it in the simple interest formula, you must first convert it to a ______.

Back

decimal

Front

A bank is offering 2.5% simple interest on a savings account. If you deposit $5,000, how much interest will you earn in three years?

Back

$375

Front

The time has to be in _____________

Back

years

Front

The compound interest formula is: A = P(1 + r)^t. What does the A represent?

Back

The total amount of money after a certain amount of time.

Front

What is the formula for calculating Simple Interest?

Back

Simple Interest = Principal × Rate × Time

Front

If you invest $1,000 at a 5% simple interest rate for 4 years, how much interest will you earn?

Back

$200

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 earned.

Front

In the compound interest formula A = P(1 + r)^t, what does 'P' stand for?

Back

Principal amount (initial investment)

Front

If you have $2,000 in a savings account that earns 3% compound interest annually, how much will you have after 2 years?

Back

$2,121.80