Understanding Interest Calculations

What is the formula for calculating simple interest?

• Interest = Rate × Time

• Interest = Principal × Rate × Time

• Interest = Principal + Rate + Time

• Interest = Principal ÷ Rate × Time

If you invest $1,000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

• $200

• $100

• $150

• $75

Calculate the total amount after 3 years if you invest $1,500 at a simple interest rate of 4%.

• $1,620

• $1,500

• $1,680

• $1,800

What is the formula for calculating compound interest?

• A = P(1 + r/n)^(nt)

• A = P(1 + rt)

• A = P(1 + r)^t

• A = P(1 + r/n)^(n)

If you invest $2,000 at a compound interest rate of 6% compounded annually for 2 years, what will be the total amount?

• 2500.00

• 2000.00

• 2100.00

• 2247.20

How much interest is earned on a $5,000 investment at a compound interest rate of 3% compounded quarterly for 1 year?

• 200.00

• 100.00

• 152.00

• 250.00

If you invest $800 at a compound interest rate of 5% compounded semi-annually for 4 years, what is the total amount?

• 974.72

• 900.50

• 1020.00

• 850.00

What is the difference between simple interest and compound interest?

• Simple interest is calculated on the principal only; compound interest is calculated on the principal plus accumulated interest.

• Simple interest is always higher than compound interest over time.

• Simple interest grows exponentially; compound interest grows linearly.

• Simple interest is calculated on the total amount; compound interest is calculated on the principal only.

If you have a principal of $1,200 and earn $240 in simple interest, what is the interest rate?

• 30%

• 15%

• 25%

• 20%

Calculate the compound interest earned on $1,000 at an interest rate of 7% compounded annually for 5 years.

• 500.00

• 350.00

• 600.75

• 402.55