Simple and Compound Interest

Front

What does the P in I = PRt mean?

Back

Principal

Front

In the formula I = P·R·T, what does R stand for in a loan?

Back

Rate: the interest percentage you will pay on a loan

Front

What is the formula for simple interest?

Back

I = Prt

Front

How do you convert the decimal 0.37 to a percent?

Back

37%

Front

If Emily’s parents put $1500 in her bank account at a simple interest rate of 8.25%, what will be the balance after 18 years?

Back

$3727.50

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

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 annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

What does the term 'interest' refer to in finance?

Back

Interest is the cost of borrowing money or the return on investment for saving.

Front

How do you calculate the total amount after applying simple interest?

Back

Total Amount = Principal + Interest, where Interest = Prt.

Front

What is the effect of increasing the interest rate on the total amount earned from simple interest?

Back

Increasing the interest rate will increase the total amount earned from simple interest.