Unit 5 Extra Practice for Test

Front

Convert 3.5% to a decimal.

Back

0.035

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

If $1,000 is invested at 16% interest, compounded continuously, what is the formula to calculate the ending balance?

Back

A = Pe^(rt), where A is the amount, P is the principal, e is the base of the natural logarithm, r is the interest rate, and t is the time in years.

Front

Classify the model A=1200(0.85)^6 as Exponential GROWTH or DECAY.

Back

Decay

Front

What is the rule of 72 in finance?

Back

A formula to estimate the number of years required to double the investment at a fixed annual rate of return: Years to double = 72 / interest rate.

Front

How do you calculate the total value of an account after a certain number of years with compounded interest?

Back

Use the compound interest formula: A = P(1 + r/n)^(nt).

Front

What does it mean for interest to be compounded monthly?

Back

Interest is calculated and added to the principal balance each month.

Front

If Shonta invests $3000 into an account gaining 8% interest compounded annually, how long will it take for her money to double?

Back

About 9 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 accumulated interest.

Front

What is the formula for calculating the future value of an investment with continuous compounding?

Back

A = Pe^(rt), where A is the future value, P is the principal, e is approximately 2.71828, r is the interest rate, and t is the time in years.