Simple and compound interest

Front

What does the 'A' in compound interest stand for?

Back

Amount in account.

Front

What does the 'I' in the interest formula stand for?

Back

Interest.

Front

How must time be calculated in the formula I = Prt?

Back

It must be in years.

Front

What expression determines how much money Bruno had in the account when he turned 16 if he was given $2000 at a 2% interest rate compounded annually?

Back

2000(1+0.02)^13.

Front

What must the rate be converted to before using it in the simple interest formula?

Back

Decimal.

Front

Define simple interest.

Back

Simple interest is calculated using the formula I = Prt, where I is interest, P is principal, r is rate, and t is time.

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 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 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 interest that has been added to it.

Front

If you invest $1000 at a 5% annual interest rate compounded annually, how much will you have after 3 years?

Back

A = 1000(1 + 0.05)^3 = $1157.63.

Front

What does 'compounded annually' mean?

Back

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