Compound and Simple Interest Practice

Front

What is the formula for calculating compound interest?

Back

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest. P is the principal amount (the initial amount of money), 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

What is the formula for calculating simple interest?

Back

The formula for simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year (as a decimal), and T is the time in years.

Front

If Carly deposited $800 at 6% compounded annually, how much will she have after 10 years?

Back

Carly will have $1432.68 after 10 years.

Front

If Lara deposited $800 at 6% simple interest, how much will she have after 10 years?

Back

Lara will have $1280 after 10 years.

Front

What is the total amount owed after borrowing $59,000 for 2 years at 11% compounded annually?

Back

The total amount owed is $72,693.90.

Front

Which equation can be used to find the value of Steve's account after 3 years with a $5,000 deposit at 4% interest compounded annually?

Back

Front

What is the total value of Audrey's account after depositing $2,800 at 2.65% interest compounded annually for 7 years?

Back

The total value of the account is $3362.57.

Front

How much extra did you pay by taking out a loan of $1,690 for 5.5 years at an interest rate of 5.7% compounded annually?

Back

You paid an extra $602.45.

Front

What does 'compounded annually' mean?

Back

'Compounded annually' means that the interest is calculated and added to the principal once a year.

Front

What does 'simple interest' mean?

Back

'Simple interest' means that the interest is calculated only on the principal amount, not on the interest that accumulates over time.