Exploring Simple and Compound Interest Concepts

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

• Percentage rate

• Profit earned

• Principal amount

• Payment period

How is interest rate expressed in the formula for simple interest?

• As a fraction

• As a whole number

• As a percentage

• As a decimal

How do you convert a percentage rate to a decimal for interest calculations?

• Multiply by 100

• Divide by 100

• Add 100

• Subtract 100

What is the total amount in Caleb's account after 4 years if he earns simple interest?

• $585

• $450

• $335

• $135

What is the interest earned by Malia after 7 years with a 4% annual rate on a $300 principal?

• $84

• $324

• $21

• $300

What is the correct step to find the total amount in an account after earning interest?

• Subtract the interest from the principal

• Multiply the principal by the interest

• Divide the principal by the interest

• Add the interest to the principal

Which formula represents compound interest calculation?

• I = PRT

• A = PRT(1 + R)

• I = P + (PRT)

• A = P(1 + R)^T

In compound interest, what does 'A' stand for?

• Added interest

• Annual rate

• Account balance

• Accrued interest

What does the exponent 'T' represent in the compound interest formula?

• Time period

• Transaction number

• Tax rate

• Total interest

Why is compound interest considered more complex than simple interest?

• It is calculated annually only

• It only applies to savings accounts

• It involves exponential growth

• It requires more basic arithmetic