Simple and Compound Interest

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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.

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What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: SI = P * r * t, where SI is Simple Interest, P is the principal amount, r is the rate of interest per year (in decimal), and t is the time in years.

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How do you convert a percent to a decimal?

Back

To convert a percent to a decimal, divide the percent by 100. For example, 4.3% = 4.3 / 100 = 0.043.

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How do you convert a decimal to a percent?

Back

To convert a decimal to a percent, multiply the decimal by 100. For example, 0.37 = 0.37 * 100 = 37%.

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What is Compound Interest?

Back

Compound Interest is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

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What is the formula for calculating Compound Interest?

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The formula for Compound Interest is: A = P (1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years.

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What does 'Principal' mean in finance?

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

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What is the difference between Simple Interest and Compound Interest?

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Simple Interest is calculated only on the principal amount, while Compound Interest is calculated on the principal plus any interest that has already been added.

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If Caiden earned $475 at a simple interest rate of 3.8% for 15 years, how much interest did he earn?

Back

Caiden earned $270.75 in interest.

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If Emily's parents deposited $1500 at an 8.25% simple interest rate for 18 years, what will be the total balance?

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The total balance will be $3727.50.