Simple and compound interest

Front

What does the 'I' in the interest formula stand for?

Back

Interest

Front

The time has to be in _____________

Back

years

Front

Sharon deposits $8000 in a 1-year account at 2% interest, compounded daily. What is Sharon’s APY to the nearest hundredth of a percent?

Back

2.02%

Front

David took out a loan for $1,200 at a 4% simple interest rate for 2 years. How much interest will he owe at the end of the loan period?

Back

$96

Front

The rate is given as a percent (%). Before using it in the simple interest formula, you must first convert it to a______

Back

decimal

Front

What is the formula for calculating simple interest?

Back

I = PRT (Interest = Principal x Rate x Time)

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 and also on the accumulated interest.

Front

If you invest $1000 at an interest rate of 5% per year, how much interest will you earn in 3 years using simple interest?

Back

$150

Front

What does APY stand for and why is it important?

Back

APY stands for Annual Percentage Yield; it reflects the total amount of interest earned on an account based on the interest rate and compounding frequency.

Front

How do you convert a percentage to a decimal?

Back

Divide the percentage by 100.