Simple and Compound Interest

Front

What does the variable A represent in the compound interest formula A = P(1 + r)^t?

Back

The total amount of money after a certain amount of time.

Front

How do you calculate simple interest?

Back

I = Prt, where I is the interest, P is the principal, r is the rate (in decimal), and t is the time (in years).

Front

What is the formula for compound interest?

Back

A = P(1 + r)^t, where A is the total amount, P is the principal, r is the interest rate (in decimal), and t is the time (in years).

Front

If you have a principal of $6,000, an interest rate of 5%, and a time period of 6 months, what is the simple interest?

Back

$150

Front

What must you do to the interest rate before using it in the simple interest formula?

Back

Convert it to a decimal.

Front

Jerry borrowed $4,000 for 5 years at a 6% simple interest rate. How much interest will he pay?

Back

$1,200

Front

What is the principal in the context of interest calculations?

Back

The initial amount of money that is invested or borrowed.

Front

What does the term 'interest rate' refer to?

Back

The percentage at which interest is charged or earned on the principal.

Front

If you invest $1,000 at an interest rate of 4% for 3 years, what is the simple interest earned?

Back

$120

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 interest that has already been added.