Simple vs. Compound Interest: A Comparative Quiz for 8th Grade

1. Sarah invests $1,000 in a savings account that offers a simple interest rate of 5% per year. How much interest will she earn after 3 years?

• $150

• $100

• $75

• $200

2. John deposits $1,500 in a bank that offers a compound interest rate of 4% per year, compounded annually. How much will he have in the account after 2 years?

• $1,640.00

• $1,622.40

• $1,500.00

• $1,700.00

3. Compare the total amount of money Sarah and John will have after 3 years. Who earns more, and by how much?

• John earns less than Sarah by Z amount.

• John earns more than Sarah by X amount.

• Both Sarah and John earn the same amount after 3 years.

• Sarah earns more than John by Y amount.

4. Emily takes a loan of $2,000 with a simple interest rate of 6% per year. How much interest will she pay if she repays the loan after 4 years?

• $360

• $600

• $240

• $480

5. Mark invests $2,500 in a fund that offers a compound interest rate of 3% per year, compounded annually. What will be the total amount in his account after 5 years?

• $2,898.18

• $3,000.00

• $2,750.00

• $2,500.00

6. If Emily had instead invested her $2,000 in a compound interest account at the same rate of 6% for 4 years, how much interest would she earn?

• $525

• $400

• $600

• $300

7. Compare the total interest earned by Emily in both scenarios (simple vs. compound). Which option is better for her?

• Simple interest is better for her.

• Neither option is beneficial for her.

• Compound interest is better for her.

• Both options yield the same interest.

8. A bank offers a simple interest rate of 5% and a compound interest rate of 4% for a 3-year term. If you invest $1,000, how much will you have with each option at the end of 3 years?

• Simple Interest: $1,100, Compound Interest: $1,050

• Simple Interest: $1,200, Compound Interest: $1,150

• Simple Interest: $1,150, Compound Interest: $1,124.86

• Simple Interest: $1,180, Compound Interest: $1,130

9. Calculate the difference in total amounts between the simple and compound interest options after 3 years. Which is more beneficial?

• 7.63; Compound interest is more beneficial.

• 3.75; Compound interest is less beneficial.

• 10.25; Both options yield the same amount.

• 5.50; Simple interest is more beneficial.

10. If you want to earn at least $300 in interest over 5 years, which type of interest (simple or compound) would you choose if you can only invest $2,000? Explain your reasoning.

• Variable interest

• Fixed interest

• Compound interest

• No interest