Financial Literacy Review (Pre-Algebra)

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. It allows investments to grow at a faster rate than simple interest.

Front

What is simple interest?

Back

Simple interest is calculated only on the principal amount of a loan or investment, not on the interest that accumulates over time.

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

What is the formula for calculating the total amount in an account with compound interest?

Back

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

Front

If you invest $1,000 at a 5% annual interest rate for 3 years, how much interest will you earn using simple interest?

Back

$150.

Front

If you invest $1,000 at a 5% annual interest rate compounded annually for 3 years, how much will you have in total?

Back

$1,157.63.

Front

What is the difference between simple and compound interest?

Back

Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus any accumulated interest.

Front

If Deja's total college expenses are $17,000 and her grandparents pay 80%, how much does she need to pay?

Back

$3,400.

Front

If Vinny invests $25,000 at 4.25% simple interest for 9 years, how much interest will he earn?

Back

$9,562.50.