Compound Interest

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.

Front

How is Compound Interest calculated?

Back

Compound Interest = P(1 + r/n)^(nt), where P is the principal amount, 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

What does 'compounded continuously' mean?

Back

Compounding continuously means that interest is calculated and added to the principal at every moment, leading to the formula A = Pe^(rt), where e is Euler's number.

Front

What is the formula for future value with monthly compounding?

Back

Future Value = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years.

Front

What does the term 'Principal' refer to?

Back

Principal refers to the initial amount of money that is invested or loaned.

Front

What does 'Rate of Interest' represent?

Back

The rate of interest is the percentage at which interest is calculated on the principal amount.

Front

What does 'Time' refer to in the context of compound interest?

Back

Time refers to the duration for which the money is invested or borrowed, usually measured in years.

Front

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

Back

'n' represents the number of times interest is compounded per year.

Front

If $1,000 is invested at 16% interest compounded continuously for 5 years, what is the ending balance?

Back

$2,225.54

Front

If Emily spends $7,400 on furniture with 9.5% interest compounded quarterly for 8 years, how much will she have paid in total?

Back

$15,683.28