GEN-MATH REVIEWER

Simple interest is calculated on the principal amount only.

• True

• False

Define the term "compound interest" and provide its formula.

If the principal amount is $2000, the interest rate is 8%, and the time period is 3 years, calculate the simple interest.

Compound interest is more beneficial for long-term investments.

• True

• False

What is the difference between the formulas for simple interest and compound interest?

If the principal amount is $5000, the interest rate is 6%, and the time period is 4 years, calculate the compound interest.

Compounding interest annually always yields a higher amount compared to quarterly compounding for the same interest rate and period.

• False

• True

Calculate the maturity value for a principal amount of $10,000 at an interest rate of 5% compounded annually for 5 years.

Higher interest rates lead to lower returns in long-term investments.

• False

• True

What are the common real-world applications of simple interest and compound interest?