Calculating Compound Interest Essentials

This video tutorial covers the concept of compound interest, explaining how it differs from simple interest. The instructor introduces the compound interest formula and demonstrates its application through several example problems. Each example involves calculating the total account value and the interest earned over a specified period. The video also highlights the importance of converting interest rates to decimals and time to years. The tutorial concludes with a summary of the key points and encourages viewers to use tools like Desmos for efficient calculations.

What does compound interest calculate interest on?

• Only the principal amount

• Both the principal and previously earned interest

• None of the above

• Only the previously earned interest

What is the formula for compound interest?

• A = P(1 + r)^t

• A = P + rt

• A = P / (1 + rt)

• A = P(1 - r)^t

How is the interest rate expressed in the compound interest formula?

• As a whole number

• As a decimal

• As a fraction

• As a percentage

What is the principal in the context of compound interest?

• The initial amount deposited

• The interest rate

• The total interest earned

• The total amount in the account

What is the correct way to convert a percentage to a decimal for the formula?

• Subtract 0.01

• Divide by 100

• Add 0.01

• Multiply by 100

For a deposit of $2400 at 4.5% interest compounded annually for 8 years, what is the total amount?

• $2400.00

• $3413.04

• $1013.04

• $4000.00

How much interest is earned from the $2400 deposit after 8 years?

• $4000.00

• $3413.04

• $1013.04

• $2400.00

If $15000 is deposited for 6 months at an annual rate of 7%, what is the total value after conversion?

• $15516.12

• $15000.00

• $1516.12

• $15700.00

What is the interest earned on a $950 deposit at 2.21% for 18 years?

• $950.00

• $458.01

• $500.00

• $1408.01

After 66 months, how much interest has a $3000 deposit earned at an annual rate of 1.6%?

• $273.68

• $500.00

• $3000.00

• $3273.68