Review of Simple & Compound Interest

Front

What is the formula for simple interest?

Back

I = Prt, where I is the interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is the formula for compound interest?

Back

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

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide by 100. For example, 18% becomes 0.18.

Front

What is the principal in the context of interest?

Back

The principal is the initial amount of money deposited or invested before interest.

Front

If Caiden deposited $475 at an interest rate of 3.8% compounded annually, what will be his balance after 15 years?

Back

$831.10

Front

Calculate the simple interest earned on a principal of $2,000 at an 8% rate for 5 years.

Back

$800

Front

How many years are in 9 months?

Back

0.75 years.

Front

What does 'compounded annually' mean?

Back

It means that the interest is calculated and added to the principal once a year.

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 from previous periods.

Front

If the interest rate is 5% per year, how much interest will be earned on a $1,000 investment after 3 years using simple interest?

Back

$150 (I = Prt = 1000 * 0.05 * 3).