Simple and Compound Interest Test

Front

What is the formula for Simple Interest?

Back

Front

What does P, R, and T stand for in the Simple Interest formula?

Back

P = Principal amount, R = Rate of interest (as a decimal), T = Time in years.

Front

How do you calculate the interest using the Simple Interest formula?

Back

Front

If you borrow $1,900 for 2.5 years at an interest rate of 5.9%, how much interest will you pay?

Back

$280.25.

Front

If Sam borrows $210 for 7 years at an interest rate of 8%, how much interest will he pay?

Back

$117.60.

Front

What is Compound Interest?

Back

Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

Front

What is the formula for Compound Interest?

Back

Front

How do you find the total return on a compound interest investment?

Back

Use the Compound Interest formula to calculate the ending balance, then subtract the principal from the total amount.

Front

If you invest $21,000 at 13.6% interest compounded quarterly for 4 years, what is your total return?

Back

$35,854.90.

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.