compound interest mixed n values

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

What is the formula for calculating compound interest?

Back

A = P(1 + r)^t, where A is the total amount, P is the principal, r is the interest rate, and t is the time in years.

Front

What does the variable 'A' represent in the compound interest formula?

Back

The total amount of money after a certain amount of time.

Front

How do you convert a percentage to a decimal for calculations?

Back

Divide the percentage by 100. For example, 9.5% becomes 0.095.

Front

If you invest $1,000 at an interest rate of 5% compounded annually, what will be the amount after 3 years?

Back

A = 1000(1 + 0.05)^3 = $1,157.63.

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

If a loan of $10,000 has an interest rate of 6% compounded annually, how much interest will be paid after 5 years?

Back

A = 10000(1 + 0.06)^5 = $13,382.26, so interest paid = $3,382.26.

Front

What does the variable 'r' represent in the compound interest formula?

Back

The interest rate expressed as a decimal.

Front

How does the compounding frequency affect the total amount of interest earned?

Back

The more frequently interest is compounded, the more interest will be earned over time.

Front

If you borrow $5,000 at an interest rate of 4% compounded quarterly, what will be the total amount owed after 2 years?

Back

A = 5000(1 + 0.04/4)^(4*2) = $5,408.16.