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 borrowed or invested.

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

How do you calculate Simple Interest?

Back

Simple Interest = Principal × Rate × Time.

Front

How do you calculate Compound Interest?

Back

Compound Interest = Principal × (1 + Rate)^Time - Principal.

Front

If you deposit $1000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

Back

$150.

Front

If you deposit $1000 at a compound interest rate of 5% for 3 years, how much will you have?

Back

$1157.63.

Front

What is the formula for calculating the total amount with Simple Interest?

Back

Total Amount = Principal + Simple Interest.

Front

What is the formula for calculating the total amount with Compound Interest?

Back

Total Amount = Principal × (1 + Rate)^Time.

Front

What is the principal in a loan?

Back

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

Front

What does the term 'Rate' refer to in interest calculations?

Back

The 'Rate' refers to the percentage of interest charged or earned on the principal.