Compound Interest

Front

What does 'A' stand for in the compound interest formula A=P(1+r)^t?

Back

The total amount.

Front

What does 'P' stand for in the compound interest formula A=P(1+r)^t?

Back

The principal amount (original amount).

Front

What is the formula for calculating compound interest?

Back

A = P(1 + r)^t

Front

If you invest $1000 at an interest rate of 5% compounded annually for 4 years, how much will you have?

Back

$1215.51

Front

If Jacob borrows $500 at an interest rate of 2.5% compounded annually for 5 years, how much will he owe?

Back

$565.70

Front

What is the effect of compounding frequency on the total amount in a compound interest account?

Back

More frequent compounding results in a higher total amount.

Front

How does the interest rate affect the total amount in a compound interest account?

Back

A higher interest rate increases the total amount.

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus any accumulated interest.

Front

If you have $1500 in an account earning 5% interest compounded annually, how much will you have after 5 years?

Back

$1914.42

Front

What is the principal amount in a compound interest scenario?

Back

The original amount of money invested or borrowed.