Simple and compound interest

Front

What is the simple interest formula?

Back

I = Prt, where I is the interest, P is the principal amount, r is the rate of interest, and t is the time in years.

Front

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

Back

The principal amount, which is the amount of money borrowed or deposited.

Front

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

Back

The rate of interest, expressed as a decimal.

Front

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

Back

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

Front

How do you convert a percentage to a decimal?

Back

Divide the percentage by 100. For example, 4.3% becomes 0.043.

Front

What is compound interest?

Back

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Front

What is the formula for compound interest?

Back

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

Front

If $2000 is invested at a 2% interest rate compounded annually for 13 years, what is the expression to find the total amount?

Back

2000(1 + 0.02)^(13).

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

If the interest rate is 5%, what is the decimal equivalent?

Back

0.05.