Interest Calculation Quiz

What is the difference between simple and compound interest?

• Simple interest is a set amount and compound interest is a percent.

• Simple interest is a set percentage and compound interest is double simple interest.

• Simple interest is paid by banks and compound interest is paid on personal investments.

• Simple interest is paid on principal and compound interest is paid on principal plus previous interest.

Which investment will earn the greatest amount of interest?

• $500 at a 2% interest rate compounded annually for 5 years

• $550 at a 2% interest rate compounded annually for 2 years

• $550 at a 2.5% simple interest rate for 3 years

• $250 at a 5% simple interest rate for 4 years

How much more money is earned on a $2,500 investment at 2% annual compound interest for 5 years than a $2,500 investment at 2% simple annual interest for 5 years?

• $10.20

• $53.68

• $106.20

• $187.34

Gabriel deposits $2,500 into each of two savings accounts. Account I earns 4% annual simple interest. Account II earns 4% interest compounded annually. Gabriel does not make any additional deposits or withdrawals. What is the sum of the balances of Account I and Account II at the end of 3 years?

• $5,600.00

• $5,612.16

• $5,624.32

• $5,200.00

Nicolas has $650 to deposit into two different savings accounts. Nicolas will deposit $400 into Account I, which earns 3.5% annual simple interest. He will deposit $250 into Account II, which earns 3 1/4% interest compounded annually. Nicolas will not make any additional deposits or withdrawals. Which amount is closest to the total balance of these two accounts at the end of 2 years?

• $672.13

• $695.00

• $694.25

• $694.51

Ben deposits $1,750 into each of two savings accounts. Account I earns 2.75% annual simple interest. Account II earns 2.75% interest compounded annually. Ben does not make any additional deposits or withdrawals. Which amount is closest to the difference between the interest Ben will earn in Account I and the interest Ben will earn in Account II at the end of 2 years?

• $96.25

• $1.32

• $97.57

• $193.82

Adam is evaluating the best way to invest $5,000. How much more money, to the nearest dollar, will he earn on his investment at 1% compound interest for 10 years than at 1% simple interest for 10 years?

• $23

• $51

• $500

• $523

Monica wants to open a savings account with a deposit of $3,000. Monica will not make any additional deposits or withdrawals after she opens her account. Her bank offers two different savings accounts: Account X pays 2.1% simple annual interest. Account Y pays 2.4% interest compounded annually. Which statement about these accounts at the end of 5 years is true?

• Account X would earn Monica about $62.70 more interest than Account Y.

• Account Y would earn Monica about $62.70 more interest than Account X.

• Account X would earn Monica about $45.00 more interest than Account Y.

• Account Y would earn Monica about $45.00 more interest than Account X.