Compound Interest Flashcard

Front

What does the P stand for in the compound interest formula A=P(1+r/n)^(nt)?

Back

The principal amount (original amount)

Front

What does the A stand for in the compound interest formula A=P(1+r/n)^(nt)?

Back

The total amount

Front

What does the t stand for in the compound interest formula A=P(1+r/n)^(nt)?

Back

The time

Front

Calculate the future account balance for a principal of $5000, interest rate of 3.75%, compounded monthly for 25 years.

Back

$12,749.30

Front

If Olivia spends $7,400 on furniture with 9.5% interest compounded quarterly for 8 years, how much will she have paid in total?

Back

$15,683.28

Front

What is the formula for calculating compound interest?

Back

A = P(1 + r/n)^(nt)

Front

Define compound interest.

Back

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

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 accumulated interest.

Front

What does r represent in the compound interest formula A=P(1+r/n)^(nt)?

Back

The interest rate (as a decimal).

Front

What does n represent in the compound interest formula A=P(1+r/n)^(nt)?

Back

The number of times interest is compounded per year.