Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula: SI = P * r * t, where P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is Compound Interest?

Back

Compound Interest is calculated on the initial principal and also on the accumulated interest from previous periods. The formula is: CI = P (1 + r/n)^(nt) - P, where P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

How do you calculate Simple Interest?

Back

To calculate Simple Interest, use the formula: SI = P * r * t.

Front

How do you calculate Compound Interest?

Back

To calculate Compound Interest, use the formula: CI = P (1 + r/n)^(nt) - P.

Front

What is the principal in interest calculations?

Back

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

Front

What does the term 'interest rate' mean?

Back

The interest rate is the percentage of the principal charged as interest for a specific period.

Front

What is the time period in interest calculations?

Back

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

Front

If you invest $1000 at a 5% simple interest rate for 3 years, how much interest will you earn?

Back

You will earn $150 in interest.

Front

If you invest $1000 at a 5% compound interest rate compounded annually for 3 years, how much will you have at the end?

Back

You will have $1157.63 at the end.

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.