Interest Practice

Front

What is the formula for continuously compounded interest?

Back

A = Pe^(rt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), and t is the time the money is invested for in years.

Front

If $1,000 is invested at 16% interest, compounded continuously, for five years, what is the ending balance?

Back

$2,225.54

Front

What does the 'P' stand for in the formula A = Pe^(rt)?

Back

Initial amount (Principal).

Front

Evaluate log_9(9).

Back

1

Front

How much would you have if you invested $350 for 10 months compounded continuously at 12.5%?

Back

$388.42

Front

What is the meaning of 'compounded continuously'?

Back

It means that interest is calculated and added to the principal at every possible instant.

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 from previous periods.

Front

How do you convert a percentage to a decimal?

Back

Divide the percentage by 100.

Front

What is the formula to calculate the future value of an investment compounded annually?

Back

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

Front

If you invest $15,000 at an interest rate of 6.5% compounded continuously for 20 years, what is the ending balance?

Back

$55,039.