WorksheetsUnderstanding Compound and Simple Interest
Total questions: 10
Worksheet time: 5mins
What is interest in finance?
A fee paid for borrowing money
Money you get for free
A type of bank account
A way to save money
In simple interest, what is the principal?
The extra money you pay back
The total amount you owe
The original amount of money borrowed
The time it takes to pay back a loan
Simple interest is most commonly used for what types of loans?
Savings accounts and student loans
Auto loans and personal loans
Mortgages and business loans
Credit cards and home equity loans
How does compound interest work?
You only pay interest on the original amount borrowed
Interest is paid only once a year
Interest is earned on the original amount and on the interest that has already been added
It makes your money grow slower over time
For which of these is compound interest usually a good thing?
Student loans
Credit card debt
Savings accounts
Personal loans
In a compound interest formula, what does the exponent tell you?
The initial amount of money.
The interest rate per year.
The total number of times interest has been added.
The number of years the money is invested.
How does the amount of interest earned change each time it is added to an account with compound interest?
It stays the same.
It decreases.
It increases.
It depends on the initial amount.
Where are you most likely to find high interest rates?
Bank savings accounts.
Loans you borrow.
Checking accounts.
Certificates of Deposit (CDs).
If you borrow money, which type of interest will usually make you pay more money back in total?
Simple interest.
Compound interest.
Both are the same.
It depends on the loan amount.
If you have $4,000 earning 3% compound interest, about how many years will it take for your money to double?
9 years
15 years
23 years
70 years
