8.12D Problem Solving with Interest

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. It is typically calculated annually, semi-annually, quarterly, or monthly.

Front

How do you calculate 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 (decimal), n is the number of times that interest is compounded per year, and t is the number of years.

Front

What is simple interest?

Back

Simple interest is calculated only on the principal amount, or the original amount of money borrowed or invested. It does not take into account any interest that has previously been added to the principal.

Front

How do you calculate simple interest?

Back

The formula for simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year (decimal), and T is the time in years.

Front

What is the difference between compound interest and simple interest?

Back

The main difference is that compound interest is calculated on the initial principal and also on the accumulated interest, while simple interest is calculated only on the principal.

Front

If you deposit $1,500 at a 7% annual compound interest rate, how much will you have after 3 years?

Back

$1,837.56

Front

If a loan of $195,000 has a 4.3% interest rate compounded annually, how much interest will be paid after 30 years?

Back

$494,546.99

Front

What is the total amount to be paid back on a loan of $250,000 at a simple interest rate of 2% over 5 years?

Back

$275,000

Front

If you deposit $500 in an account with 5% annual simple interest, how much will you have after 3 years?

Back

$575.00

Front

If you deposit $500 in an account with 5% interest compounded annually, how much will you have after 3 years?

Back

$578.81