Simple and compound interest MPJH

You deposit $2,500 in a savings account.

What is the difference in the amount of interest that will be paid in each situation?

Option A) Interest rate of 8.25% simple interest for 2 years

Option B) Interest rate of 6.5% compounded annually for 2 years

• $769.40

• $76.94

• $335.56

• $68.52

To earn as much interest as possible, you should open a savings account that earns ______ interest and has the _____ interest rate.

• compound; lowest

• simple ; lowest

• compound ; highest

• simple ; highest

If you are calculating the simple interest and you are given the time in months.  How can you find the time in years?

• divide 12 by the months

• multiply 12 times the months

• divide the months by 12

• change the months to a decimal

What is the formula for simple interest?

• A=P(1+r)^t

• I=P(1+r)^t

• I=Prt

• A=Prt

Emmy borrows $1200 from a bank with 8% simple interest per year. How much will she pay back after 2 years?

• $192

• $150

• $1392

• $1350

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

• fraction

• dollar amount

• ratio

• decimal

Emmy invests $1200 in a savings account that earns 8% compound interest per year. How much will her account balance be after 2 years?

• $1399.68

• $2592.00

• $199.68

• $1592.00

Mr. Peterson paid $1,020 in simple interest for a loan, which was given to him at a rate of 5% for 3 years. How much money did he borrow originally?

• $5400.00

• $6800.00

• $3240.00

• $14620.00

Your 2-year investment of $20,000 received 5.2% interest compounded annually.  What is your total return?

• $2080.00

• $1040.00

• $22134.08

• $42080.00

You invested $1,900 at 4% interest compounded annually for 2 years.  How much interest did you earn in 2 years?

• $155.04

• $2055.04

• $137.24

• $2052.00