Compound Interest

Front

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

Back

The total amount.

Front

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

Back

The principal amount (original amount).

Front

What is the formula for calculating compound interest?

Back

A = P(1 + r)^t

Front

If you invest $1000 at an interest rate of 5% compounded annually for 3 years, how much will you have?

Back

$1157.63

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 already been added.

Front

If you want to double your money in 10 years with compound interest, what approximate interest rate do you need?

Back

7.2% (using the Rule of 72).

Front

What is the effect of increasing the compounding frequency (e.g., from annually to semi-annually)?

Back

The total amount will increase because interest is calculated more frequently.

Front

How does the time period affect the total amount in compound interest?

Back

The longer the time period, the more interest will accumulate, leading to a higher total amount.

Front

If Jacob borrows $500 at an interest rate of 2.5% compounded annually for 5 years, how much will he owe?

Back

$565.70

Front

If Daniel invests $360 at an interest rate of 5.5% compounded annually for 8 years, what will be the total amount?

Back

$552.49