Understanding Simple and Compound interest

Front

What does the 't' represent in the simple interest formula I=Prt?

Back

Time, in years.

Front

How can you find the time in years if you are given the time in months?

Back

Divide the months by 12.

Front

Convert 18 months to years.

Back

1.5 Years.

Front

In the compound interest formula A=P(1+r)^t, what does the P stand for?

Back

The principal amount (original amount).

Front

What is important about how time is calculated in I= Prt?

Back

It must be in years.

Front

What is the formula for calculating simple interest?

Back

I = Prt.

Front

What does 'I' represent in the simple interest formula I=Prt?

Back

Interest earned.

Front

What does 'P' represent in the compound interest formula A=P(1+r)^t?

Back

The principal amount (original amount).

Front

If the interest rate is 5% per year, what is it in decimal form?

Back

0.05.

Front

How do you convert an annual interest rate to a monthly interest rate?

Back

Divide the annual rate by 12.