Compound Interest and Borrowing Money Flashcard

Front

What does 'semi-annually' mean in terms of frequency per year?

Back

2

Front

How do you calculate the total price of an item bought on credit?

Back

Total price = Principal + Interest accrued over the loan period.

Front

What is the formula for compound interest?

Back

A = P(1 + r/n)^(nt), where A is the amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

If an investment is compounded monthly, how many times is interest applied in one year?

Back

12

Front

What is the importance of the time variable in compound interest calculations?

Back

Time determines how long the money is invested or borrowed, affecting the total interest accrued.

Front

What is the final value of an investment of $3000 at 6% per annum compounded monthly for 2 years?

Back

$3381.48

Front

What is the significance of compounding frequency (e.g., annually, semi-annually, monthly)?

Back

More frequent compounding results in more interest accrued over the same period.

Front

How do you convert weeks into years for interest calculations?

Back

Divide the number of weeks by 52.

Front

What is the final amount in a retirement account after 5 years if $1500 is invested at 5% interest compounded annually?

Back

$1914.42

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest accrued.