Compound Interest

Front

What is Compound Interest?

Back

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It is commonly used in finance and investments.

Front

How often is interest compounded if it is compounded quarterly?

Back

Interest is compounded 4 times a year.

Front

If Emily spends $7,400 on furniture with 9.5% interest compounded quarterly for 8 years, what is the total amount paid?

Back

$15,683.28

Front

What is the formula for calculating compound interest?

Back

A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate, n is the number of times that interest is compounded per year, and t is the number of years.

Front

If Karla invests $1,000 at 6.75% interest compounded semi-annually for 15 years, how much will she earn?

Back

$2,706.86

Front

What does 'principal' mean in the context of compound interest?

Back

Principal is the initial amount of money that is invested or borrowed, before interest.

Front

If the principal is $5,000, the interest rate is 3.75%, and it is compounded monthly for 25 years, what is the future account balance?

Back

$12,749.30

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 the accumulated interest.

Front

If Courtney saves $2,200 at 5.2% interest compounded daily for 4 years, how much will she have?

Back

$2,708.63

Front

What does 'compounded daily' mean?

Back

Compounded daily means that interest is calculated and added to the principal every day.