12.11_Wed_AQR3

Front

What is the formula for compound interest?

Back

A = P(1 + r/n)^(nt) where A is the amount of money accumulated after n years, including interest. P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years the money is invested or borrowed.

Front

Define principal in the context of finance.

Back

Principal is the initial sum of money invested or loaned, before interest.

Front

What does it mean for interest to be compounded monthly?

Back

Compounding monthly means that the interest is calculated and added to the principal balance each month.

Front

Calculate the future value of an investment of $5000 at an interest rate of 3.75% compounded monthly for 25 years.

Back

$12,749.30

Front

What is the total return on a $20,000 investment at 5.2% interest compounded annually over 3 years?

Back

$23,285.05

Front

If you spend $7,400 on furniture with a 9.5% interest rate compounded quarterly, how much will you pay in total after 8 years?

Back

$15,683.28

Front

What is the future value of a $1,000 investment at 6.75% interest compounded semi-annually for 15 years?

Back

$2,706.86

Front

How much will $2,200 grow to in 4 years at an interest rate of 5.2% compounded daily?

Back

$2,708.63

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 and also on the accumulated interest from previous periods.

Front

Define the term 'interest rate'.

Back

The interest rate is the percentage of the principal charged by the lender for the use of its money or paid by the borrower to the lender.