Compound Interest Problem Solving

The video tutorial explains compound interest, a method of earning interest on both the initial principal and the accumulated interest. It introduces the compound interest formula and breaks down its components: amount, principal, rate, and time. The video provides a step-by-step guide to calculating compound interest, including converting rates to decimals and time to years. Three example problems are solved to demonstrate the application of the formula, highlighting the importance of distinguishing between total amount and interest earned.

What is compound interest primarily used for?

• Calculating taxes

• Earning money on savings

• Budgeting expenses

• Determining loan eligibility

Which of the following is NOT a component of the compound interest formula?

• Principal

• Rate

• Time

• Tax

What is the purpose of converting the rate to a decimal in the compound interest formula?

• To simplify the calculation

• To make it easier to add

• To convert it to a percentage

• To ensure accuracy in multiplication

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

• Percentage

• Principal

• Profit

• Period

How do you convert a percentage to a decimal?

• Divide by 100

• Multiply by 100

• Add 100

• Subtract 100

What does the 'T' in the compound interest formula stand for?

• Transaction

• Tax

• Time

• Total

What is the formula for compound interest?

• A = P(1 - R)^T

• A = P + RT

• A = P + R/T

• A = P(1 + R)^T

What is the significance of the 'A' in the compound interest formula?

• It represents the amount of interest

• It represents the total amount

• It represents the annual rate

• It represents the accumulated time

What is the purpose of the compound interest formula?

• To find the total amount in an account

• To determine loan eligibility

• To budget expenses

• To calculate taxes

What is the significance of the 'A' in the compound interest formula?

• It represents the amount of interest

• It represents the accumulated time

• It represents the annual rate

• It represents the total amount