8.12D Simple and Compound Interest Part 1

Front

What is simple interest?

Back

Simple interest is calculated using the formula: I = P * r * t, where I is the interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

How do you calculate the total amount to be paid back on a loan with simple interest?

Back

Total Amount = Principal + Interest. Interest is calculated using the formula: I = P * r * t.

Front

What is compound interest?

Back

Compound interest is calculated on the initial principal and also on the accumulated interest from previous periods. It can be calculated using the formula: 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

What is the difference between simple and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest that has already been added.

Front

If Victoria borrowed $4500 at a simple interest rate of 6% per year, what will be the total amount she pays after 5 years?

Back

Total Amount = $4500 + ($4500 * 0.06 * 5) = $5850.

Front

How do you find the balance in a compound interest account after a certain number of years?

Back

Use the formula: A = P (1 + r/n)^(nt), where A is the balance, 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

What is the formula for calculating interest earned on a compound interest account?

Back

Interest Earned = Total Amount - Principal.

Front

If Caiden deposited $475 at an interest rate of 3.8% compounded annually, what will his balance be after 15 years?

Back

Balance = $475 * (1 + 0.038)^15 = $831.10.

Front

How much interest will Jamar earn after 20 years if he deposits $200 at 2.5% annual compound interest?

Back

Interest Earned = Total Amount - Principal = $327.72 - $200 = $127.72.

Front

What is the total balance of two savings accounts with the same principal but different interest types after 5 years?

Back

Total Balance = Balance from Simple Interest + Balance from Compound Interest.