Compound Interest

What is the formula to calculate compound interest?

• A = P(1 + r)^t

• A = P(1 + r/n)^(nt)

• A = P(1 + r/n)^(n*t)

• A = P(1 + r/n)^(t)

If the principal amount is $1000, the interest rate is 5%, and the time period is 2 years, what is the compound interest?

• $110.00

• $95.00

• $102.50

• $105.00

Calculate the compound interest on an amount of $2000 at 10% per annum for 2 years compounded annually.

• $250

• $400

• $420

• $320

What is the difference between compound interest and simple interest?

• Compound interest includes interest on interest, while simple interest does not.

• Simple interest is used for short-term loans, while compound interest is used for long-term investments.

• Simple interest is always higher than compound interest.

• Simple interest is calculated annually, while compound interest is calculated monthly.

If the principal amount is $5000, the interest rate is 8%, and the time period is 3 years, what is the compound interest?

• $1267.68

• $1000.25

• $1500.50

• $2000.75

Explain the concept of compounding in compound interest.

• Compounding involves subtracting the interest earned from the principal amount

• Compounding in compound interest means interest is only calculated once on the principal amount

• Compounding in compound interest involves adding the interest earned on the principal amount back to the principal, resulting in interest being calculated on an increasing total amount.

• Compounding results in a decreasing total amount over time

Calculate the compound interest on an amount of $3000 at 12% per annum for 3 years compounded quarterly.

• $4100.75

• $3900.25

• $4000.50

• $4041.47

What factors affect the compound interest calculation?

• Color of the sky, Day of the week, Shoe size

• Principal amount, interest rate, compounding frequency, and time period.

If the principal amount is $7000, the interest rate is 6%, and the time period is 4 years, what is the compound interest?

• $1837.33

• $2500.50

• $2000.75

• $1500.25

How does the frequency of compounding affect the final amount in compound interest calculations?

• The frequency of compounding has no impact on the final amount

• The final amount decreases as the frequency of compounding increases

• The frequency of compounding affects the final amount by increasing it as compounding occurs more frequently.

• Compounding only affects the initial investment, not the final amount