Compound Interest

Front

What does 'A' stand for in the compound interest formula A=P(1+r)^t?

Back

The total amount after interest is applied.

Front

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

Back

The principal amount (original amount) invested.

Front

How do you calculate the interest earned using the total amount 'A' and the principal 'P'?

Back

Subtract P (original amount) from A (total amount).

Front

What is the formula for calculating compound interest?

Back

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

Front

If Julia invested $1000 at 5% interest compounded annually for 4 years, how much total will she have?

Back

$1215.51.

Front

If Henry deposits $750 at an 8.5% interest rate compounded annually for 5 years, how much total will he have?

Back

$1127.74.

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 earned.

Front

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

Back

The interest rate (as a decimal) per time period.

Front

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

Back

The number of time periods (usually years) the money is invested or borrowed.

Front

If you want to find out how much interest an account has earned, what do you do after calculating 'A'?

Back

Subtract the principal 'P' from the total amount 'A'.