Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated only on the principal amount, or the original amount of money borrowed or invested.

Front

What is Compound Interest?

Back

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

Front

What is the formula for Simple Interest?

Back

The formula for Simple Interest is I = P * r * t, where I is the interest, P is the principal, r is the rate of interest per year, and t is the time in years.

Front

What is the formula for Compound Interest?

Back

The formula for Compound Interest is A = P (1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate, n is the number of times that interest is compounded per year, and t is the number of years.

Front

In the Simple Interest formula, what does 'P' stand for?

Back

'P' stands for Principal, which is the initial amount of money borrowed or invested.

Front

In the Simple Interest formula, what does 'r' represent?

Back

'r' represents the rate of interest per year, expressed as a decimal.

Front

In the Simple Interest formula, what does 't' represent?

Back

't' represents the time the money is borrowed or invested, measured in years.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100.

Front

If the principal is $6,000 and the interest rate is 5% for 1 year, what is the simple interest?

Back

The simple interest is $300.

Front

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

Back

Jerry will pay $1,200 in interest.