Compound and Continuous Interest

Front

What is compound interest?

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

How is continuous interest calculated?

Back

Continuous interest is calculated using the formula A = Pe^(rt), where A is the amount of money accumulated after n years, P is the principal amount, r is the annual interest rate, and t is the time in years.

Front

Convert 5.2% to a decimal.

Back

.052

Front

What is the formula for 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, P is the principal amount, r is the annual interest rate, n is the number of times that interest is compounded per year, and t is the number of years.

Front

If $2,200 is invested at 5.2% interest compounded daily for 4 years, how much will it grow to?

Back

$2708.63

Front

Convert 18% to a decimal.

Back

.18

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 $1,000 is invested at 16% interest compounded continuously for 5 years, what is the ending balance?

Back

$2,225.54

Front

Convert 6.5% to a decimal.

Back

.065

Front

What is the effective annual rate (EAR)?

Back

The effective annual rate (EAR) is the interest rate on an investment or loan that is compounded over a period of time, expressed as an annual rate.