Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated only on the principal amount, or the original amount of money borrowed or invested.

Front

How is Simple Interest calculated?

Back

Simple Interest = Principal (P) × Rate (r) × Time (t) where Rate is in decimal form.

Front

What is Compound Interest?

Back

Compound Interest is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

Front

What is the formula for Compound Interest?

Back

A = P(1 + r)^t where A is the total amount, P is the principal, r is the rate, and t is the time.

Front

What does 'A' represent in the compound interest formula A = P(1 + r)^t?

Back

A represents the total amount of money after a certain amount of time.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide by 100.

Front

What is the decimal equivalent of 4.3%?

Back

0.043

Front

What is the principal in the context of interest?

Back

The principal is the original sum of money borrowed or invested, before interest.

Front

If Jerry borrowed $4,000 at a 6% simple interest rate for 5 years, how much interest will he pay?

Back

$1,200

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.