12. PAM Financial Unit Week 2 Investing

Principal = $500

Interest rate =5%

Time = 5 years

What is the interest earned using simple interest.

• 95
• 105
• 125
• 135

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

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

Write the percent as a decimal. 
4.3%

• 4.3
• .43
• .043
• 4300

What is the formula for simple interest?

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

5. Describe the difference between simple interest and compound interest?

• Simple Interest is applied yearly and compound interest is applied quarterly.
• Simple interest is less than 10% and Compound interest is above 10%.
•  Compound Interest is calculated only on the principal amount of a loan. Simple Interest is calculated on the principal amount and also on the accumulated interest of previous periods, and can thus be regarded as “interest on interest.”
• Simple Interest is calculated only on the principal amount of a loan. Compound Interest is calculated on the principal amount and also on the accumulated interest of previous periods, and can thus be regarded as “interest on interest.”

Which of the following exponential equations is the formula for compound interest?

• 
• 
• 
• 

Jay'den earned $475 from mowing lawns last summer. He deposited this money in an account that pays an interest rate of 3.8% compounded annually. Jay'den wants to know his balance after 15 years?

What does 15 represent?

• Principal or initial value, P

• Rate of interest, r

• Number of times interest is compounded, n

• Time, t

Jay'den earned $475 from mowing lawns last summer. He deposited this money in an account that pays an interest rate of 3.8% compounded annually. Jay'den wants to know his balance after 15 years?

What does compounded annually mean?

• Principal or initial value, P

• Rate of interest, r

• Number of times interest is compounded, n

• Time, t

Interest earned on both the principal and any interest earned on the principal.

• Rate of return

• Compound interest

• Simple interest

• Principal earnings

What should be written on line 6?

• the date
• the amount of the check
• who the check is going to
• your signature