Consumers Chapter 7 Flashcard

Front

What is the Compound Interest formula?

Back

A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest. P is the principal amount (initial investment), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years the money is invested or borrowed.

Front

Calculate the new balance for $3,500 at 7% compounded semiannually for 2 years.

Back

$4,016.33

Front

Calculate the new balance for $1,500 at 8% compounded quarterly for 1 year.

Back

$1,623.65

Front

What does the term 'reconciled balance' mean?

Back

The reconciled balance is the adjusted balance of an account after accounting for outstanding checks, deposits, and service charges.

Front

Find the reconciled balance given: Check register balance: $582.40, Statement ending balance: $554.55, Outstanding Checks: $32.75, $51.40, Outstanding Deposits: $105.50, Service Charge: $6.50.

Back

$575.90

Front

What is 'interest' in the context of banking?

Back

Interest is the amount paid by a bank to a depositor based on the balance in their account, typically expressed as a percentage.

Front

What is the difference between 'principal' and 'interest'?

Back

Principal is the original sum of money invested or loaned, while interest is the cost of borrowing that money or the earnings from investing it.

Front

What does 'compounded quarterly' mean?

Back

It means that the interest is calculated and added to the principal four times a year.

Front

What is the significance of the 'annual interest rate'?

Back

The annual interest rate is the percentage of the principal that will be paid as interest over one year.

Front

What is an 'outstanding check'?

Back

An outstanding check is a check that has been written and recorded in the check register but has not yet cleared the bank.