Simple and Compound Interest Practice

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula: SI = P * r * t, where P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is Compound Interest?

Back

Compound Interest is calculated on the initial principal, which also includes all of the accumulated interest from previous periods. The formula is: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest.

Front

How do you calculate Total Amount with Simple Interest?

Back

Total Amount = Principal + Simple Interest. Total Amount = P + (P * r * t).

Front

What is the formula for calculating Simple Interest?

Back

SI = P * r * t, where SI is Simple Interest, P is Principal, r is the rate of interest, and t is the time in years.

Front

If you deposit $5,000 at a 2.5% simple interest rate for 3 years, how much interest do you earn?

Back

Interest = 5000 * 0.025 * 3 = $375.

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 accumulated interest.

Front

How do you find the Compound Interest for a principal of $1735 at 0.8% for 1 year?

Back

Compound Interest = A - P, where A = P(1 + r)^t. Here, A = 1735(1 + 0.008)^1 = $1,748.88, so CI = 1748.88 - 1735 = $13.88.

Front

What is the total amount to be repaid for a loan of $18,000 at 7% simple interest for 4 years?

Back

Total Amount = Principal + Simple Interest = 18000 + (18000 * 0.07 * 4) = $23,040.

Front

What does 'compounded annually' mean?

Back

Compounded annually means that the interest is calculated and added to the principal once a year.

Front

How much interest will Jerry pay on a $4,000 loan at 6% simple interest for 5 years?

Back

Interest = 4000 * 0.06 * 5 = $1,200.