Chapter 11 Review Flashcardizz

Front

Back

Front

What is the formula for compound interest?

Back

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

Front

If you invest $40,000 at 14% interest compounded annually for 6 years, how much will you have?

Back

$87,798.90

Front

What is simple interest?

Back

Simple interest is calculated using the formula I = PRT, where I is the interest, P is the principal, R is the rate, and T is the time in years.

Front

How do you calculate the total amount after 2 years with $2,700 at 7% simple interest?

Back

Total = Principal + Interest = $2,700 + ($2,700 * 0.07 * 2) = $3,078.

Front

What is the formula for calculating the total amount with compound interest?

Back

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

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

Back

$15,683.28

Front

What does it mean for interest to be compounded quarterly?

Back

It means that the interest is calculated and added to the principal four times a year.

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 do you find the future value of an investment with compound interest?

Back

Use the formula A = P(1 + r/n)^(nt).