Finances Diagnostic

The simple interest formula is I=Prt. The P represents the principal. The principal is ___________________.

• the amount of money borrowed or deposited

• the percent interest for his year

• the amount taxed

• the amount the bank owes you for being a customer at their bank

The rate is given as a percent (%).  Before using it in the simple interest formula, you must first convert it to a______.

• fraction
• decimal
• ratio
• dollar amount

Write the percent as a decimal. 
4.3%

• 4.3
• .43
• .043
• 4300

• I

• P

• r

• t

• The principal amount

• The interest rate

• The time period

• The total interest

• The principal amount

• The interest rate

• The time period

• The total interest

Which of the following is a real-life example of compound interest?

• A car loan with a fixed interest rate

• A savings account with interest added to the balance monthly

• A personal loan with a simple interest rate

• A mortgage with a fixed monthly payment

• I

• P

• r

• t

To earn as much interest as possible, you should open a savings account that earns ______ interest and has the _____ interest rate.

• compound; lowest
• simple ; lowest
• compound ; highest
• simple ; highest

If you are calculating the simple interest and you are given the time in months.  How can you find the time in years?

• divide 12 by the months
• multiply 12 times the months
• divide the months by 12
• change the months to a decimal