Simple Interest and Investment Calculations

The video tutorial explains how to calculate simple interest on an investment of $8,500 at an annual rate of 7%. It demonstrates the calculation for the first year, verifies it using two formulas, and shows how the interest remains constant over five years. The tutorial also guides viewers through completing a table of balances for each year, emphasizing the use of simple interest formulas to verify calculations.

What is the initial investment amount in the problem?

• $8,500

• $9,095

• $595

• $7,000

What is the annual simple interest rate applied to the investment?

• 10%

• 3%

• 7%

• 5%

How much interest is earned in the first year?

• $595

• $500

• $850

• $700

Which formula is used to calculate simple interest?

• I = P * r * t

• A = P(1 + rt)

• I = P * r

• A = P(1 + r/n)^(nt)

What is the ending balance after the first year?

• $9,690

• $10,285

• $8,500

• $9,095

What is the ending balance for year two?

• $9,095

• $9,690

• $10,285

• $10,880

What is the ending balance for year three?

• $9,690

• $10,285

• $10,880

• $11,475

What is the ending balance for year four?

• $12,070

• $10,285

• $10,880

• $11,475

What is the ending balance for year five?

• $11,475

• $10,880

• $12,665

• $12,070

How does simple interest differ from compound interest?

• Simple interest is calculated on the initial principal only.

• Simple interest is always higher than compound interest.

• Simple interest is calculated on the accumulated amount.

• Simple interest rate changes annually.