Unit 2 Part II: Compound Interest

What does the 'p' stand for in the simple interest formula i = prt?

• Percentage

• Profit

• Principal

• Payment

What must be the unit of time when calculating simple interest using the formula i = prt?

• Days

• Months

• Years or portions of a year

• Hours

In the simple interest formula, what does 'i' represent?

• Income

• Installment

• Interest

• Increase

Which of the following is the correct formula for calculating simple interest?

• i = prt

• i = p + r + t

• i = p / r / t

• i = p - r - t

What is your return if you invested $600 at 5% (0.05) for 1 year?

• $3000

• $30

• $300

• $3

What is one simple way of defining compound interest?

• The interest calculated on the initial principal only

• Interest on interest

• A fee charged for borrowing money

• The total amount of money borrowed

Who discovered the constant e?

• Isaac Newton

• Albert Einstein

• Jacob Bernoulli

• Leonhard Euler

What mathematical concept was Jacob Bernoulli studying when he discovered the constant e?

• Differential equations

• Continuous compound interest

• Prime numbers

• The Fibonacci sequence

What is the approximate value of the constant e?

• 3.14159

• 1.61803

• 2.71828

• 1.41421

As the number of compounding periods per year increases to infinity, the compound interest approaches which of the following values?

• ln

• 2.5

• e

• π