Simple and Compound Interest

What is the principal in the context of interest?

• The initial amount of money borrowed or deposited.

• The total interest paid over the loan period.

• The rate at which interest is calculated.

• The final amount after interest is added.

What does 'P' represent in the simple interest formula?

• The amount of money borrowed or deposited.

• The interest rate applied to the principal.

• The total amount after interest is added.

• The time period for which the money is borrowed.

What does 'A' represent in the compound interest formula?

• The total amount of money after a certain amount of time.

• The initial principal amount before interest.

• The interest rate applied to the principal.

• The number of times that interest is compounded per year.

How does compounding frequency affect the total amount in a savings account?

• More frequent compounding results in a higher total amount due to interest being calculated on previously earned interest.

• Compounding frequency has no effect on the total amount in a savings account.

• Less frequent compounding leads to a higher total amount due to lower interest rates.

• Compounding only affects the principal amount, not the total amount.

How do you calculate the interest earned on a principal amount using simple interest?

• I = Prt, where P is the principal, r is the rate, and t is the time.

• I = P + rt, where P is the principal, r is the rate, and t is the time.

• I = P - rt, where P is the principal, r is the rate, and t is the time.

• I = Pr^2t, where P is the principal, r is the rate, and t is the time.

What is the difference between simple interest and compound interest?

• Simple interest is calculated only on the principal amount.

• Compound interest is calculated only on the principal amount.

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

• Compound interest is calculated only on the accumulated interest.

If you deposit $1,500 at 7% annual compound interest, what will be the total amount after 3 years?

• $1,500.00

• $1,837.56

• $1,900.00

• $2,000.00

If the interest rate is 5% compounded annually, how much will $1,000 grow to after 2 years?

• $1,050.00

• $1,102.50

• $1,100.00

• $1,120.00

What is the formula for compound interest?

• A = P(1 + r)^t

• A = P(1 - r)^t

• A = P(1 + rt)

• A = P(1 + r/n)^(nt)

What is the formula for simple interest?

• I = Prt

• I = P + rt

• I = P - rt

• I = Pr / t