2021/22 S3 Ex.2C Compound Interest

2021/22 S3 Ex.2C Compound Interest

by LHK

Key Terms To Keep In Mind

• Principal (P); The sum of money that is borrowed or invested

• Rate of Interest (R); The percent of the principle paid as interest per time period

• Time (T); The number of days, months or years that the money is borrowed or invested

• Amount (A); The amount is the sum of the total interest and the principal over a given period

Difference?

Simple Interest & Compound Interest

Simple Interest v/s Compound Interest

• Simple interest; Paid or received over a certain period is a fixed percentage of the principal amount that was borrowed or lent.

• Compound interest; Accumulate and is added to the accumulated interest of previous periods; it includes interest on interest, in other words.

Let's Practice!!

Multiple Choice

Your 3 year investment of $20,000 received 5.2% interest compounded annually.  What is your total return?

• $23,285.05
• $3,285.05
• $2,385
• $32,285

Multiple Choice

The compound interest formula is:

A = P(1 + r)^t

What does the A represent?

• The amount of interest earned.

• The amount of time that has passed.

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

• The amount required to invest.

Multiple Choice

Caiden deposited $475 in an account that pays an interest rate of 3.8% compounded annually. What will be his balance after 15 years?

• $827.52

• $831.10

• $839.45

• $846.80

Poll

How do you think you understand this topic?

• Bad. I need help.

• Ok

• Good

• Awesome!! I understand everything.