Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula 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 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. The formula is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal, 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

What is the formula for calculating Simple Interest?

Back

I = P * r * t

Front

What is the formula for calculating Compound Interest?

Back

A = P(1 + r/n)^(nt) or A = P(1 + r)^t for annual compounding.

Front

If you invest $1,000 at a 5% simple interest rate for 3 years, how much interest will you earn?

Back

$150 (I = 1000 * 0.05 * 3)