Simple & Compound Interest

Front

What is Compound Interest?

Back

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

Front

What is Simple Interest?

Back

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Tags

CCSS.7.RP.A.3

Front

What does 'P' stand for in the formula I = Prt?

Back

Principal, which is the initial amount of money invested or borrowed.

Tags

CCSS.7.RP.A.3

Front

What does 'r' represent in the formula I = Prt?

Back

The annual interest rate (in decimal form) applied to the principal.

Front

What does 't' represent in the formula I = Prt?

Back

Time, typically measured in years, for which the money is invested or borrowed.

Front

How do you convert months into years for calculating Simple Interest?

Back

Divide the number of months by 12.

Tags

CCSS.7.RP.A.3

Front

What is the formula for calculating Compound Interest?

Back

A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest.

Front

If you deposit $1,500 at an interest rate of 7% compounded annually, what will be the total amount after 3 years?

Back

$1,837.56.

Front

What is the difference between Simple Interest and Compound Interest?

Back

Simple Interest is calculated only on the principal, while Compound Interest is calculated on the principal plus any interest that has already been added.

Tags

CCSS.7.RP.A.3

Front

What is the effect of compounding frequency on Compound Interest?

Back

The more frequently interest is compounded, the more interest will be accrued.