Compound Interest - Identify Variables

Front

What does the A stand for in the compound interest formula?

Back

Final amount

Front

What does 15 represent in the context of compound interest?

Back

Time, t

Front

What does $475 represent in the context of compound interest?

Back

Principal or initial value, P

Front

What does 3.8% represent in the context of compound interest?

Back

Rate of interest, r

Front

What does the t stand for in the compound interest formula?

Back

Time

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 time in years.

Front

If the principal is $1000, the rate is 5%, compounded annually, what is the amount after 2 years?

Back

A = 1000(1 + 0.05/1)^(1*2) = $1102.50

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 and also on the accumulated interest.

Front

In the formula A = P(1 + r/n)^(nt), what does n represent?

Back

The number of times interest is compounded per year.

Front

If an account compounds interest quarterly, how many times is interest compounded in 5 years?

Back

20 times (4 times per year * 5 years).