Time Value of Money

Caiden earned $475 from mowing lawns last summer. He deposited this money in an account that pays a simple interest rate of 3.8%. What will be the amount of interest earned after 15 years?

• $3182.50

• $270.75

• $2707.50

• $745.75

What is the formula for simple interest?

• A=P(1+r)^t

• FV = PV + n(PV × i)

• I=P(1+r)t

• A=Prt

What does the P in I =PRT mean?

• Power

• Principal

• Product

• Percent

The Principal and Interest are always___________.

• fraction
• decimal
• percent
• money

Question #5

In the formula I=P·R·T, what does r stand for in a loan?

A. Rate: the interest percentage you will pay on a loan

B. Ratio: the size of the interest interval compared to time

C. Return: how much money you end up earning

D. Reserves: how much money you have in the investment

• A

• B

• C

• D

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

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

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

What is the formula for compound interest?

• A=P(1+r)^t

• FV = PV + n(PV × i)

• I=P(1+r)t

• FV = PV(1 + i)n

What is the formula for discounting?

• A=P(1+r)^t

• FV = PV + n(PV × i)

• PV = FV/(1 + i)n

• FV = PV(1 + i)n

Calculates the present value of money that is received in the future

• Simple Interest

• Compound Interest

• Discounting