INTEREST FLASHCARDZIZ - 8TH

Front

What is the formula for Compound Interest?

Back

A = P(1 + r)^t

Front

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

Back

A represents the total amount in the account after interest is applied.

Front

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

Back

P represents the principal amount (initial investment).

Front

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

Back

r represents the annual interest rate (as a decimal).

Front

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

Back

t represents the time the money is invested or borrowed for, 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 plus any interest that has already been added.

Front

How do you calculate simple interest?

Back

Simple Interest (I) = P * r * t

Front

If Faith invested $4,000 at 18% simple interest for 4 years, how much interest will she earn?

Back

Interest = 4000 * 0.18 * 4 = $2880.

Front

If Sam invested $5,000 at 15% compound interest for 4 years, how do you calculate the total amount?

Back

Total Amount = 5000 * (1 + 0.15)^4 = $5000 * 1.7493 = $8746.50.

Front

What is the total interest earned by Sam if he invested $5,000 at 15% compound interest for 4 years?

Back

Total Interest = Total Amount - Principal = $8746.50 - $5000 = $3746.50.