Simple and compound interest

Front

What does the variable A represent in the compound interest formula A = P(1 + r)^t?

Back

The total amount of money after a certain amount of time.

Front

What is the principle in the context of compound interest?

Back

The amount of money borrowed or deposited.

Front

What is interest?

Back

Extra money paid for borrowing.

Front

Convert 4.3% to a decimal.

Back

.043

Front

What does 'compound' mean in finance?

Back

Principle added into the interest.

Front

What is the formula for calculating simple interest?

Back

I = P * r * t, where I is interest, P is principal, r is rate, and t is time.

Front

If you invest $100 at a 5% interest rate for 3 years, what is the simple interest earned?

Back

$15.

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

How do you calculate the total amount with compound interest?

Back

A = P(1 + r/n)^(nt), where n is the number of times interest is compounded per year.

Front

What does the variable r represent in the interest formulas?

Back

The interest rate, expressed as a decimal.