Simple & Compound Interest Review

Front

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

Back

Interest earned.

Front

What is the formula for calculating simple interest?

Back

I = Prt, where I is interest, P is principal, r is the interest rate, and t is time.

Front

If you invest $1,000 at a 5% simple interest rate for 3 years, how much interest will you earn?

Back

$150.

Front

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

Back

Principal amount (the initial amount of money).

Front

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

Back

Interest rate (expressed as a decimal).

Front

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

Back

Time (in years).

Front

What is compound interest?

Back

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Front

If $2,000 is invested at an annual interest rate of 4% compounded annually for 5 years, how much will it grow to?

Back

$2,432.16.

Front

What does it mean if interest is compounded quarterly?

Back

Interest is calculated and added to the principal four times a year.

Front

What does it mean if interest is compounded annually?

Back

Interest is calculated and added to the principal once a year.