Simple and Compound interest

Front

What does the letter A mean in the interest formula?

Back

Total

Front

What is the correct definition of interest?

Back

Money paid to you by a bank for the money you have in a bank account.

Front

In the interest formulas, what does the t stand for?

Back

Time

Front

What is the formula for calculating simple interest?

Back

Simple Interest = Principal × Rate × Time

Front

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

Back

$150

Front

What is compound interest?

Back

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Front

How do you calculate compound interest?

Back

Compound Interest = Principal × (1 + Rate)^Time - Principal

Front

If you borrow $2,000 at a 6% compound interest rate for 4 years, how much total will you owe?

Back

$2,528.64

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus any accumulated interest.

Front

What does the term 'Principal' mean in interest calculations?

Back

The initial amount of money borrowed or invested.