Simple and Compound Interest

Front

What is Compound Interest?

Back

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

Front

What does P stand for in the formula I = Prt?

Back

P stands for Principal, which is the initial amount of money invested or borrowed.

Front

How do you convert a percentage to a decimal?

Back

Divide the percentage by 100.

Front

What is the formula for calculating Simple Interest?

Back

Simple Interest (I) = Principal (P) × Rate (r) × Time (t) in years.

Front

If you invest $2000 at a 5% interest rate for 3 years, what is the Simple Interest?

Back

$300.

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 many years is 9 months?

Back

0.75 years.

Front

What is the rate in the formula I = Prt?

Back

The rate (r) is the percentage of interest charged or earned, expressed as a decimal.

Front

If you have a loan of $5000 at a 4% interest rate for 2 years, what is the Simple Interest?

Back

$400.

Front

What is the first step in calculating Compound Interest?

Back

Determine the principal amount, interest rate, and time period.