Simple & Compound Interest Review

Front

What is the formula for simple interest?

Back

I = Prt

Front

What does the term 'principal' refer to in finance?

Back

The principal is the initial amount of money borrowed or invested.

Front

What does 'I' stand for in the simple interest formula I = Prt?

Back

I stands for Interest earned.

Front

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

Back

r represents the interest rate.

Front

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

Back

t represents the time the money is borrowed or invested.

Front

What is the meaning of 'semiannually'?

Back

Semiannually means interest is compounded every half of a year or two times a year.

Front

What is the meaning of 'quarterly'?

Back

Quarterly means interest is compounded four times a year.

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

If you invest $1,000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

Back

Interest = 1000 * 0.05 * 3 = $150.

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.