Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated only on the principal amount, or the original amount of money deposited or borrowed.

Front

What is Compound Interest?

Back

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

Front

What is the formula for Simple Interest?

Back

I = P * r * t, where I is the interest, P is the principal, r is the rate of interest per year, and t is the time in years.

Front

What is the formula for Compound Interest?

Back

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

If you invest $20,000 at an interest rate of 5.2% compounded annually for 3 years, what is the total return?

Back

$23,285.05

Front

Sue took an $8000 loan at 16.8% interest for 60 months. How much did she pay in total?

Back

$14,720

Front

If you deposit $46,875 into a simple interest account and it grows to $50,000 in 1 year and 8 months, what is the rate of interest per year?

Back

4%.

Front

Calculate the simple interest earned on $350 at a rate of 2.5% over 3 years.

Back

$26.25

Front

What does 'principal' mean in the context of interest?

Back

Principal is the original sum of money borrowed or invested, before interest.

Front

What does 'rate of interest' mean?

Back

The rate of interest is the percentage of the principal charged as interest for a specific period.