Simple and compound interest

Front

What is the formula for simple interest?

Back

I = Prt, where I is interest, P is principal, r is rate, and t is time.

Front

What does 'P' represent in the simple interest formula?

Back

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

Front

What does 'r' represent in the simple interest formula?

Back

r represents the rate of interest, expressed as a percentage.

Front

What does 't' represent in the simple interest formula?

Back

t represents the time the money is borrowed or invested, usually in years.

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 does compound interest differ 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 $1,000 at a 5% annual interest rate for 3 years, how much simple interest will you earn?

Back

You will earn $150 in simple interest.

Front

If you invest $1,000 at a 5% annual interest rate compounded annually for 3 years, how much will you have at the end?

Back

You will have $1,157.63 at the end of 3 years.

Front

What is the definition of interest?

Back

Interest is the extra money paid for borrowing or the money earned on an investment.

Front

What is the total amount after 5 years if $4,000 is borrowed at 6% simple interest?

Back

The total amount will be $5,200.