Comparing Simple and Compound Interest Practice

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula: I = P * r * t, where I is the interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is Compound Interest?

Back

Compound Interest is calculated on the initial principal and also on the accumulated interest from previous periods. The formula is A = P (1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest.

Front

How do you calculate Simple Interest?

Back

To calculate Simple Interest, use the formula: I = P * r * t.

Front

How do you calculate Compound Interest?

Back

To calculate Compound Interest, use the formula: 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

What is the difference between Simple 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

If Holly takes a loan of $10,000 at 4% simple interest for 4 years, how much interest will she pay?

Back

Interest = 10,000 * 0.04 * 4 = $1,600.

Front

If Holly takes a loan of $10,000 at 5% simple interest for 6 years, how much interest will she pay?

Back

Interest = 10,000 * 0.05 * 6 = $3,000.

Front

What is the total amount Holly would pay back for the 4-year loan at 4% simple interest?

Back

Total Amount = Principal + Interest = 10,000 + 1,600 = $11,600.

Front

What is the total amount Holly would pay back for the 6-year loan at 5% simple interest?

Back

Total Amount = Principal + Interest = 10,000 + 3,000 = $13,000.

Front

How much more interest does Evie's account earn compared to Dominic's after 3 years?

Back

Evie's account earns $0.60 more than Dominic's account.