Financial Literacy Review

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

How do you convert months to years for interest calculations?

Back

To convert months to years, divide the number of months by 12.

Front

What is compound interest?

Back

Compound interest is calculated on the initial principal and also on the accumulated interest from previous periods, using the formula: 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 is the formula for calculating total amount with compound interest?

Back

The formula is A = P (1 + r/n)^(nt), where A is the total 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

If a loan has an annual interest rate of 7.5%, how is the interest calculated for 5.5 years?

Back

The interest can be calculated using the formula for compound interest or simple interest, depending on the type of loan.

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

How do you determine which loan offer is better?

Back

Compare the total repayment amounts of each loan to determine which one costs less.

Front

What is the principal in a loan?

Back

The principal is the original sum of money borrowed or invested, excluding any interest or fees.

Front

What does it mean to earn interest on an investment?

Back

Earning interest means receiving a payment for the use of your money, typically expressed as a percentage of the principal.

Front

How do you calculate the interest paid on a loan?

Back

Interest paid can be calculated by subtracting the principal from the total amount repaid.