simple and compound interest review

Front

What is simple interest?

Back

Simple interest is the amount of money earned or paid on a principal amount over a specific period of time, calculated using the formula I = Prt.

Front

What does 'P' represent in the simple interest formula I = Prt?

Back

'P' represents the principal amount, which is the initial amount of money borrowed or deposited.

Front

What does 'r' represent in the simple interest formula I = Prt?

Back

'r' represents the rate of interest per year, expressed as a decimal.

Front

What does 't' represent in the simple interest formula I = Prt?

Back

't' represents the time in years for which the money is borrowed or invested.

Front

Calculate the simple interest for $1000 at 5% for 3 years.

Back

$150

Front

If you deposit $200 at a simple interest rate of 4% for 5 years, how much interest will you earn?

Back

$40

Front

What is compound interest?

Back

Compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods.

Front

How is compound interest different from simple 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 you invest $500 at a compound interest rate of 6% compounded annually for 2 years, what will be the total amount?

Back

$563.16

Front

What is the formula for calculating 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.