Understanding Interest and Inflation

What is the formula for calculating simple interest?

• Interest = Principal + Rate + Time

• Interest = Rate × Time

• Interest = Principal × Rate × Time

• Interest = Principal ÷ Rate × Time

If you invest $500 at a simple interest rate of 5% per year, how much interest will you earn in 3 years?

• $100

• $50

• $150

• $75

Calculate the total amount after 4 years if $1,000 is invested at a simple interest rate of 6% per year.

• $1,240

• $1,300

• $1,200

• $1,100

What is compound interest and how does it differ from simple interest?

• Compound interest is only applicable to savings accounts.

• Compound interest is always lower than simple interest.

• Compound interest differs from simple interest in that it is calculated on both the principal and accumulated interest, while simple interest is calculated only on the principal.

• Simple interest is calculated on both the principal and accumulated interest.

If you invest $1,000 at an annual compound interest rate of 4%, what will be the total amount after 2 years?

• $1,000.00

• $1,081.60

• $1,040.00

• $1,200.00

Calculate the compound interest earned on $2,000 after 3 years at an annual interest rate of 5%, compounded annually.

• 500.00

• 315.25

• 400.00

• 250.00

If a bank offers a compound interest rate of 3% per annum, how much will $1,500 grow in 5 years?

• $1,500.00

• $1,900.00

• $1,738.91

• $1,600.50

Explain the concept of depreciation in financial terms.

• Depreciation is the increase in the value of an asset over time.

• Depreciation is the systematic reduction in the recorded cost of a fixed asset, reflecting its usage and wear over time.

• Depreciation refers to the total cost of an asset divided by its lifespan.

• Depreciation is the process of selling an asset for a profit.

If a car is purchased for $20,000 and depreciates at a rate of 15% per year, what will be its value after 2 years?

• $14,450

• $16,000

• $18,000

• $12,000

What is the formula to calculate the depreciation of an asset?

• Depreciation = Cost x Useful Life

• Depreciation = Cost - (Salvage Value x Useful Life)

• Depreciation = (Cost - Salvage Value) / Useful Life

• Depreciation = (Cost + Salvage Value) / Useful Life