Compound Interest

Front

What does 'A' stand for in the compound interest formula A=P(1+r)^t?

Back

The total amount.

Front

How do you find the amount of interest earned after compounding?

Back

Subtract P (original amount) from A (total amount).

Front

Calculate the balance after 3 years for a $5000 deposit at 1.5% compounded quarterly.

Back

$5,229.70.

Front

What type of growth is represented by compound interest?

Back

Growth.

Front

If Trevor invests $1500 at 12% compounded annually, will he have $4000 in 3 years?

Back

No.

Front

What is the formula for compound interest?

Back

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

Front

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

Back

The principal amount (initial investment).

Front

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

Back

The annual interest rate (as a decimal).

Front

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

Back

The time the money is invested or borrowed for, in years.

Front

What is the effect of compounding frequency on the total amount?

Back

More frequent compounding results in a higher total amount.