Simple and Compound Interest

Front

What is the formula for calculating Simple Interest?

Back

I = P * R * T, 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 does 'P' represent in the Simple Interest formula?

Back

P represents the principal amount, which is the initial sum of money invested or loaned.

Front

What does 'R' stand for in the Simple Interest formula?

Back

R stands for the rate of interest, expressed as a decimal.

Front

What does 'T' represent in the Simple Interest formula?

Back

T represents the time the money is invested or borrowed for, measured in years.

Front

How do you convert a decimal to a percent?

Back

Multiply the decimal by 100 and add a percent sign. For example, 0.37 becomes 37%.

Front

How do you convert a percent to a decimal?

Back

Divide the percent by 100. For example, 4.3% becomes 0.043.

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

What is the formula for calculating 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

If you deposit $1,500 at an annual compound interest rate of 7%, what will be the total amount after 3 years?

Back

$1837.56.

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 interest that has already been added.