CFA# 2 Post Review - 2

Front

What is simple interest?

Back

Simple interest is calculated using the formula: I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years.

Front

How do you calculate total amount with simple interest?

Back

Total Amount = Principal + Interest. Use the formula: A = P + (PRT).

Front

What is compound interest?

Back

Compound interest is calculated on the initial principal and also on the accumulated interest from previous periods. It can be calculated using the formula: A = P(1 + r/n)^(nt).

Front

How do you convert months to years for interest calculations?

Back

To convert months to years, divide the number of months by 12.

Front

What is the formula for calculating the slope of a line?

Back

The slope (m) is calculated as m = (y2 - y1) / (x2 - x1), where (x1, y1) and (x2, y2) are two points on the line.

Front

What does a slope of 0 indicate about a line?

Back

A slope of 0 indicates that the line is horizontal.

Front

What does an undefined slope indicate about a line?

Back

An undefined slope indicates that the line is vertical.

Front

How do you calculate the total amount in a savings account with compound interest?

Back

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

Front

What is the effect of increasing the interest rate on the total amount in a savings account?

Back

Increasing the interest rate will increase the total amount in the savings account over time.

Front

What is the relationship between the principal amount and the interest earned?

Back

The interest earned is directly proportional to the principal amount; as the principal increases, the interest earned also increases.