Interest Check

The money you earn on an investment is called...

• Interest

• Principal

• Rate

• Time

The amount you start with or invest is called what?

• Interest

• Rate

• Principal

• Time

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.

The simple interest formula is I=Prt.  The P represents the principle.  The principle is ___________________.  

• the amount of money borrowed or deposited
• the percent interest for his year
• the amount taxed
• the amount the bank owes you for being a customer at their bank

The simple interest formula is I=Prt.  What does the t represent?

• Principle
• Interest
• Time, in hours
• Time, in years

The rate is given as a percent (%). Before using it in the simple interest formula, you must first convert it to a______.

• fraction

• decimal

• ratio

• dollar amount

What is the formula for simple interest?

• A=P(1+r)^t
• I=Prt
• I=P(1+r)t
• A=Prt

If you wanted to amount of interest an account has earned after being compounded annually. What would you have to do after you found "A" using the formula A=P(1+r)^t ?

• Add A (total amount) plus P (original amount)

• Subtract A (total amount from P (original amount)

• Add P (original amount) plus A (total amount)

• Subtract P (original amount) from A (total amount)

John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions enable him to earn MORE interest?

• selecting an account with a higher interest rate
• leaving his money in the account for a long period of time
• transferring money into his checking account each month
• higher interest rate AND leaving money in for a longer time

Jerry borrowed $4,000 for 5 years at 6% simple interest rate. How much interest is that?

• $800
• $1,000
• $1,200
• $1,500