Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula: I = P * r * t, 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

What is Compound Interest?

Back

Compound Interest is calculated on the initial principal and also on the accumulated interest from previous periods. The formula is 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

How do you calculate the total amount to be paid back with Simple Interest?

Back

Total Amount = Principal + Simple Interest. Use the formula: Total Amount = P + (P * r * t).

Front

How do you calculate the total amount to be paid back with Compound Interest?

Back

Total Amount = Principal * (1 + r/n)^(nt).

Front

If John borrows $48,000 at 12% interest for 4 years, what is the total amount he will pay back?

Back

$71,040.

Front

If Robert invests $200 at 20% compounded annually for 3 years, how much will he have in his account?

Back

$345.60.

Front

What is the formula for calculating Compound Interest?

Back

A = P (1 + r/n)^(nt).

Front

If Kennedy wins $3,000 and invests it at 2.9% compounded annually for 10 years, how much interest will she earn?

Back

$992.78.

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 accumulated interest.

Front

If Emilio borrows $1200 at 8% simple interest for 2 years, how much will he pay back?

Back

$1392.