Topics Consumer Finance

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What is compound interest?

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Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

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How is compound interest different from simple interest?

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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.

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What does it mean for interest to be compounded quarterly?

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Compounding quarterly means that the interest is calculated and added to the principal four times a year.

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What is an amortization table?

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An amortization table is a fixed table that shows how much of your fixed monthly loan payment goes toward interest and how much goes toward the principal until the loan is paid off.

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If you invest $1,000 at an interest rate of 5% compounded annually, how much will you have after 3 years?

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$1,157.63

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What is the formula for calculating compound interest?

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

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What is the principal in a loan?

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The principal is the original sum of money borrowed or invested, excluding any interest or fees.

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How do you calculate the future value of an investment?

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Future Value = Present Value x (1 + interest rate)^number of periods.

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What is the significance of the annual percentage rate (APR)?

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The APR is a measure of the cost of borrowing, expressed as a yearly interest rate, which includes any fees or additional costs associated with the loan.

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If you want to save $10,000 in 5 years with an interest rate of 6% compounded annually, how much do you need to invest now?

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$7,472.58