Compound Interest Formula

Front

What is the Compound Interest Formula?

Back

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

Front

What does 'compounded monthly' mean?

Back

Interest is calculated and added to the principal 12 times a year.

Front

If the principal is $5000, the interest rate is 3.75%, and the time is 25 years, what is the future account balance compounded monthly?

Back

$12,749.30

Front

How do you calculate the interest earned on an investment?

Back

Interest = Future Value - Principal.

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 interest that has been added.

Front

If Maya won $3,000 and earns 2.9% interest compounded quarterly, how much interest will she earn in 10 years?

Back

$1,005.09

Front

What does 'compounded quarterly' mean?

Back

Interest is calculated and added to the principal 4 times a year.

Front

What is the total return on a $17,500 investment at 6.7% interest compounded annually over 5 years?

Back

$24,202.50

Front

If Jennifer invested $1,000 at 6.75% interest compounded semi-annually, how much interest will she earn in 15 years?

Back

$1,706.86

Front

What value do you use for n if your money is compounded quarterly?

Back

4.