Compound Interest

Front

What is Compound Interest?

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

What is the formula for Compound Interest?

Back

Front

Back

'P' represents the principal amount, which is the initial sum of money invested or borrowed.

Front

Back

'r' represents the annual interest rate expressed as a decimal.

Front

Back

't' represents the time the money is invested or borrowed for, measured in years.

Front

If Karla invests $1,000 at an interest rate of 6.75% compounded annually, what is the equation to find the amount after 15 years?

Back

Front

If Steve deposits $5,000 at an interest rate of 4% compounded annually, what is the equation to find the value after 3 years?

Back

Front

Calculate the future value of an investment of $5,000 at an interest rate of 3.75% compounded annually for 25 years.

Back

The future value is $12,550.80.

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 plus any interest that has already been added.

Front

What is the effect of compounding frequency on compound interest?

Back

The more frequently interest is compounded, the more interest will be accrued, leading to a higher total amount.