Compound Interest Assignment

Front

What is Compound Interest?

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

How is Compound Interest calculated annually?

Back

Compound Interest = P(1 + r/n)^(nt), where P = principal amount, r = annual interest rate, n = number of times interest applied per time period, t = number of time periods.

Front

What is the formula for calculating future value with monthly compounding?

Back

Future Value = P(1 + r/n)^(nt), where P = principal, r = annual interest rate, n = number of compounding periods per year, t = number of years.

Front

What does 'compounded continuously' mean?

Back

Compounding continuously means that interest is calculated and added to the principal at every moment, using the formula A = Pe^(rt), where e is Euler's number.

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 accumulated interest.

Front

If you invest $40,000 at 14% interest compounded annually for 6 years, what is the future value?

Back

$87,798.90

Front

What is the future value of a $5000 investment at 3.75% interest compounded monthly for 25 years?

Back

$12,749.30

Front

How do you find the interest rate if you know the principal, time, and future value?

Back

Use the formula A = Pe^(rt) and solve for r.

Front

What is the future value of $600 invested at 6% compounded annually for 7 years?

Back

$902.18

Front

How much will the Arnold's pay for a $195,000 loan at 4.3% interest compounded annually after 30 years?

Back

$689,546.99