Simple & Compound Interest (Mix)

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, which also includes all of 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

How do you calculate the total amount to be repaid on a loan with Simple Interest?

Back

Total Amount = Principal + Interest, where Interest is calculated using the formula I = P * r * t.

Front

What is the formula for calculating interest earned on a compound interest investment?

Back

Interest Earned = Total Amount - Principal, where Total Amount is calculated using A = P (1 + r/n)^(nt).

Front

If you invest $100 at a 5% simple interest rate for 3 years, how much interest will you earn?

Back

Interest = 100 * 0.05 * 3 = $15.

Front

If you invest $200 at a 4% compound interest rate for 2 years, what will be the total amount?

Back

Total Amount = 200 * (1 + 0.04)^2 = $208.16.

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 that has already been added.

Front

How does the time period affect Simple Interest?

Back

The longer the time period, the more interest will be earned, as interest is directly proportional to time.

Front

How does the rate of interest affect Compound Interest?

Back

A higher rate of interest will result in more interest earned over time, as it increases the amount on which future interest is calculated.

Front

What is the effect of compounding frequency on Compound Interest?

Back

The more frequently interest is compounded, the more total interest will be earned. For example, monthly compounding will yield more than annual compounding.