Simple and Compound Interest

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What is the formula for calculating simple interest?

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

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CCSS.7.RP.A.3

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

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Divide the number of months by 12.

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CCSS.8.EE.C.7B

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

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$30

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CCSS.7.RP.A.3

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What is the principal in a simple interest calculation?

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

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CCSS.7.RP.A.3

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

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

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CCSS.7.RP.A.3

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What is the time period in the simple interest formula?

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

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CCSS.8.EE.C.7B

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What is compound interest?

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

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CCSS.7.RP.A.3

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How does compound interest differ from simple interest?

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

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CCSS.7.RP.A.3

Front

What is the formula for calculating compound interest?

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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.

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

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