Simple and Compound Interest

The principal in an investment or loan is _________.

• the amount of money borrowed or deposited

• the amount taxed

• the percent interest for this year

• the amount the bank owes you for being a customer at their bank

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=Prt
• I=P(1+r)t
• A=Prt

When calculating interest, the rate must be converted into a ____ before multiplying.

• fraction

• mixed number

• decimal

• integer

What does P stand for in I = Prt ?

• percent
• partner
• percent change
• principal

A bank is offering 2.5% simple interest on a savings account. If you deposit $5,000, how much interest will you earn in three years?

• $5375

• $375

• $3750

• $425

Sarah borrowed $18,000 for 4 years at an annual simple interest rate of 7%. What is the total amount she will repay for the car loan?

• $504000

• $5040

• $23040

• $18000

A bank is offering 7% annual compound interest on a savings account. If you deposit $1,500, what will be the total amount of money in your savings account after three years?

• $337.56

• $1837.56

• $1663.08

• $1843.88

Kara borrowed $21,000 for 5½ years at an annual compound interest rate of 7.5% to buy a car. What is the total amount she will repay the bank for the auto loan?

• $31258.34

• $10258.34

• $455961.91

• $27165