Financial Math

Front

What does 'n' represent in compound interest when interest is compounded semi-annually?

Back

n = 2 (the number of compounding periods per year)

Front

What formula is used for continuously compounded interest?

Back

A = Pe^(rt)

Front

What is the total amount paid on a loan of $195,000 at 4.3% interest compounded annually after 30 years?

Back

$689,546.99

Front

How much will you have after investing $300 at 6% compounded continuously for 4 years?

Back

$381.37

Front

Is it better to have interest compounded daily or quarterly at 7% when opening a savings account?

Back

Daily - so you earn money more often

Front

What is the formula for calculating compound interest?

Back

A = P(1 + r/n)^(nt) where A is the amount, P is the principal, r is the rate, n is the number of times interest is compounded per year, and t is the time in years.

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 $1,000 at an interest rate of 5% compounded annually for 10 years, what will be the total amount?

Back

$1,628.89

Front

What does 'A' represent in the compound interest formula?

Back

A represents the total amount of money accumulated after n years, including interest.

Front

What is the effect of increasing the compounding frequency on the total amount of interest earned?

Back

Increasing the compounding frequency results in more interest earned, as interest is calculated on a more frequent basis.