Financial Algebra: UII Assessment Review

Front

What is Compound Interest?

Back

When you take your interest and reinvest multiple times during the period in order to earn interest on your interest.

Front

What is Simple Interest?

Back

When interest payments are made only on the principal (initial amount invested), not on previously earned interest.

Front

What is the formula for calculating Simple Interest?

Back

Simple Interest = Principal × Rate × Time.

Front

What does the term 'Principal' refer to in finance?

Back

The initial amount of money invested or loaned.

Front

What is an Interest Rate?

Back

The percentage at which interest is charged or paid on an amount of money.

Front

How do you calculate Compound Interest?

Back

Compound Interest = Principal × (1 + Rate/n)^(nt) - Principal, where n is the number of times interest is compounded per year.

Front

What is the difference between Simple Interest and Compound Interest?

Back

Simple Interest is calculated only on the principal, while Compound Interest is calculated on the principal plus any previously earned interest.

Front

What is the formula for Compound Interest when compounded annually?

Back

A = P(1 + r)^t, where A is the amount, P is the principal, r is the rate, and t is the time.

Front

What does 'Compounded Continuously' mean?

Back

Interest is calculated and added to the principal at every moment, leading to exponential growth.

Front

What is the formula for continuously compounded interest?

Back

A = Pe^(rt), where A is the amount, P is the principal, e is Euler's number, r is the rate, and t is the time.