Compound Interest

Front

What is compound interest?

Back

Compound interest is the interest calculated on the initial principal, which also includes all the accumulated interest from previous periods on a deposit or loan.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 6.5% becomes 0.065.

Front

What does the variable 'P' represent in the formula A = P(1 + r)^t?

Back

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

Front

What does 'r' represent in the compound interest formula?

Back

'r' represents the annual interest rate (in decimal form) applied to the principal.

Front

What does 't' represent in the compound interest formula?

Back

't' represents the time the money is invested or borrowed for, in years.

Front

How do you calculate the total amount after 7 years if $2,800 is invested at 2.65% compounded annually?

Back

Use the formula A = P(1 + r)^t. Here, A = 2800(1 + 0.0265)^7 = $3,362.57.

Front

What is the formula for calculating compound interest?

Back

The formula for calculating compound interest is A = P(1 + r)^t, where A is the amount of money accumulated after n years, including interest.

Front

If you invest $3,000 at a 2% interest rate compounded annually, what is the expression to find the amount after 16 years?

Back

The expression is A = 3000(1 + 0.02)^{16}.

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

How do you find the interest earned on an investment?

Back

The interest earned can be found by subtracting the principal from the total amount: Interest = A - P.