Compound Interest

Compound Interest

Vocabulary

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.

Annually means once a year (1 period).

Semi-annually means twice a year (2 periods).

Monthly means every month in a year (12 periods).

Quarterly means every three months or 4 times a year (4 periods).

Daily means every day in a year (365 periods).

Multiple Choice

What does the P stand for in this formula?

• Initial amount

• Final amount

• Rate

• Time

• The number of times compounded per year

Multiple Choice

What does the r stand for in this formula?

• Initial amount

• Final amount

• Rate

• Time

• The number of times compounded per year

Multiple Choice

What does the n stand for in this formula?

• Initial amount

• Final amount

• Rate

• Time

• The number of times compounded per year

Find the total amount.

Multiple Choice

Emily’s parents put $1,500 in her bank account for college tuition. At an interest rate of 8.25% compounded semiannually,what will be the balance after 18 years?

• $6,273.50

• $6,314.08

• $6,385.72

• $6,427.94

Multiple Choice

Mark took a loan out for $25,690 to purchase a truck. At an interest rate of 5.2% compounded monthly, how much total will he have paid after 5 years?

• $33,299.42

• $33,672.68

• $34,157.04

• $34,710.88

Multiple Choice

Olivia would like to buy some new furniture for her home. She decides to buy the furniture on credit with 9.5% interest compounded quarterly. If she spent $7,400, how much total will she have paid after 8 years?

• $15,415.94

• $15,683.28

• $15,927.56

• $16,349.72

Find the Principle

Multiple Choice

You want to save $5,000 for future family vacation.  If the bank pays 4.3% compounded monthly for 3 years, then how much will you need to invest to reach your vacation goal?  

• $307,042,791
• $5,000
• $3,250
• $4,395.89

Multiple Choice

Johnny takes an undisclosed sum of money and deposits it in a bank at an interest rate of 2%. He leaves the money in the account for 6 years, compounded quarterly. If the Johnny withdraws after 6 years is $455,125, what was the sum of money he deposited?

• $403 780

• $404 138

• $406 362

• $436 870

Finding the Interest Rate

Multiple Choice

Approximately what interest rate would be needed in order to grow an investment of $1,400 to $2,500 in 10 years if the interest was compound monthly?

• 5.96%
• 5.84%
• 5.81%
• 5.88%

Multiple Choice

Approximately what interest rate would be needed in order to grow an investment of $1,400 to $2,500 in 10 years if the interest was compound monthly?

• 5.96%
• 5.84%
• 5.81%
• 5.88%

Finding the number of periods to compound interest.

Multiple Choice

Monthly means how many times a year?

• 4 
• 12
• 52
• 365

Multiple Choice

Semi-Annually means how many times a year?

• 4 
• 2
• 1
• 6

Finding Time

Multiple Choice

Karla invested $1,000 in savings bonds. If the bonds earn 6.75% interest compounded semi-annually.

Which exponential equation can be used to find how much money Karla will earn in 15 years?

Multiple Choice

Morales Bank offers you 3.9% interest compounded monthly. How long will it take for your money to triple if you use Morales Bank?

• 17 years and 10 months

• 28 years and 2 months

• 28 years and 3 months

• 29 years

Multiple Choice

Tran invests $15,000 in a savings account that pays 4% simple interest. About how many years will it take for the account to double at this rate?

• 7 years
• 60 years
• 25 years
• 27 years

Done.

Where is your money going?