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 calculated on the initial principal and also on 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.

Front

What does the 'P' in the interest formula stand for?

Back

P stands for Principal, which is the initial amount of money borrowed or invested.

Front

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

Back

r represents the rate of interest, expressed as a decimal.

Front

What does the 't' in the interest formula indicate?

Back

t indicates the time the money is borrowed or invested, measured in years.

Front

How do you calculate the total amount after applying Simple Interest?

Back

Total Amount = Principal + Simple Interest.

Front

If Jerry borrowed $4,000 for 5 years at 6% simple interest, what is the interest earned?

Back

Interest = 4000 * 0.06 * 5 = $1,200.

Front

What is the total balance after 5 years for Jerry's loan?

Back

Total Balance = Principal + Interest = 4000 + 1200 = $5,200.

Front

What is the formula for calculating Compound Interest?

Back

A = P (1 + r/n)^(nt), where A is the total amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

If Caiden earned $475 and deposited it at 3.8% compounded annually for 15 years, what is the total balance?

Back

Total Balance = $831.10.