Simple and Compound Interest

Front

What is the formula for calculating simple interest?

Back

Simple Interest (SI) = Principal (P) × Rate (R) × Time (T)

Front

How do you convert months into years for the simple interest formula?

Back

Divide the number of months by 12.

Front

If you invest $200 at an annual simple interest rate of 5% for 3 years, how much interest will you earn?

Back

$30

Front

What is the principal in a simple interest calculation?

Back

The principal is the initial amount of money invested or borrowed.

Front

What does the term 'rate' refer to in the context of simple interest?

Back

The rate is the percentage of interest charged or earned on the principal per time period.

Front

What is the time period in the simple interest formula?

Back

The time period is the duration for which the money is invested or borrowed, expressed in years.

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 does compound interest differ from simple interest?

Back

Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus any interest that has already been added.

Front

What is the formula for calculating compound interest?

Back

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

Front

What does 'semi-annually' mean in terms of compounding?

Back

Semi-annually means that interest is compounded twice a year.