Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated only on the principal amount, or the original amount of money borrowed or invested.

Front

What is Compound Interest?

Back

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

Front

What is the formula for Simple Interest?

Back

The formula for Simple Interest is I = P * r * t, where I is the interest, P is the principal, r is the rate of interest, and t is the time in years.

Front

What does 'P' represent in the Simple Interest formula?

Back

'P' represents the Principal amount, which is the initial sum of money borrowed or invested.

Front

What does 'r' represent in the Simple Interest formula?

Back

'r' represents the Rate of interest, expressed as a decimal.

Front

What does 't' represent in the Simple Interest formula?

Back

't' represents the Time in years for which the money is borrowed or invested.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100.

Front

If Andrew borrows $79,500 and earns $10,017 in simple interest over 2 years, what is the interest rate?

Back

The interest rate is 6.3%.

Front

If Riley invests $1,000 at 6.75% compounded annually for 15 years, how much total interest will he earn?

Back

Riley will earn $1,663.90 in total interest.

Front

What is the formula for Compound Interest?

Back

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