Compound Interest

Front

What is Compound Interest?

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

How is Compound Interest calculated?

Back

Compound Interest = P(1 + r/n)^(nt), where P = principal amount, r = annual interest rate (decimal), n = number of times interest is compounded per year, t = number of years.

Front

What does 'compounded annually' mean?

Back

It means that the interest is calculated once a year on the principal amount.

Front

What does 'compounded monthly' mean?

Back

It means that the interest is calculated 12 times a year, with each month's interest added to the principal.

Front

What does 'compounded semi-annually' mean?

Back

It means that the interest is calculated twice a year, with each half-year's interest added to the principal.

Front

If $1,000 is invested at 16% interest, compounded continuously, for five years, what is the ending balance?

Back

$2,225.54

Front

Principal: $5000, Interest Rate: 3.75%, Time: 25 years, Compounded Monthly. What is the future account balance?

Back

$12,749.30

Front

The Arnold's took out a loan for $195,000 at a 4.3% interest rate compounded annually. How much total will they have paid after 30 years?

Back

$689,546.99

Front

How many times a year is interest compounded if it is compounded monthly?

Back

12 times a year.

Front

If Karla invested $1,000 in savings bonds at 6.75% interest compounded semi-annually, how much will she earn in 15 years?

Back

$2,706.86