Simple and Compound Interest

Front

What does the variable A represent in the compound interest formula A = P(1 + r)^t?

Back

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

Front

If a bank offers 7% annual compound interest, how do you express 7% as a decimal?

Back

0.07

Front

What is the formula for calculating simple interest?

Back

Simple Interest = Principal × Rate × Time

Front

If Jerry borrowed $4,000 for 5 years at a 6% simple interest rate, how much interest will he pay?

Back

$1,200

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 and also on the accumulated interest.

Front

How do you convert a percentage to a decimal?

Back

Divide the percentage by 100.

Front

What is the total amount in a savings account after 3 years if $1,500 is deposited at 7% annual compound interest?

Back

$1,837.56

Front

In the formula A = P(1 + r)^t, what does P represent?

Back

The principal amount (the initial amount of money).

Front

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

Back

The annual interest rate (as a decimal).

Front

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

Back

$200