Understanding Interest Calculations

What is the formula for calculating simple interest?

• Interest = Rate × Time

• Interest = Principal ÷ Rate × Time

• Interest = Principal × Rate × Time

• Interest = Principal + Rate + Time

If you invest $1,000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

• $200

• $150

• $75

• $100

What is the formula for calculating compound interest?

• A = P (1 + r/n)^(t)

• A = P (1 + r/n)^(n)

• A = P (1 + r)^(nt)

• A = P (1 + r/n)^(nt)

If you invest $1,000 at a compound interest rate of 5% compounded annually for 3 years, how much will you have at the end?

• 1100.50

• 1157.63

• 1050.75

• 1200.00

Compare the total amount from simple interest and compound interest for an investment of $1,000 at 5% over 3 years.

• Total amount with simple interest: $1,300; Total amount with compound interest: $1,400

• Total amount with simple interest: $1,100; Total amount with compound interest: $1,150

• Total amount with simple interest: $1,150; Total amount with compound interest: $1,157.63

• Total amount with simple interest: $1,200; Total amount with compound interest: $1,250

If you invest $2,000 at a simple interest rate of 4% for 5 years, what is the total amount including interest?

• $3000

• $2200

• $2400

• $2600

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

• Lower frequency of compounding increases total amount in compound interest.

• Compounding frequency has no effect on the total amount in compound interest.

• Higher frequency of compounding results in a greater total amount in compound interest.

• Higher frequency of compounding decreases total amount in compound interest.

Calculate the compound interest on $1,500 at an interest rate of 6% compounded quarterly for 2 years.

• 150.00

• 300.00

• 450.15

• 190.05

If you have a loan of $5,000 at a simple interest rate of 7% for 4 years, how much interest will you pay?

• $1,200

• $1,400

• $700

• $1,000

How would you graph the growth of an investment with simple interest over time?

• The graph will be a bar chart comparing different investments.

• The graph will be a curve indicating exponential growth.

• The graph will show a fluctuating line representing variable interest rates.

• The graph will be a straight line showing linear growth of the investment over time.