Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest (SI) is calculated using the formula: SI = P * r * t, where P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is Compound Interest?

Back

Compound Interest (CI) is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. The formula is: A = P(1 + r/n)^(nt), where A is the amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is I = P * r * t.

Front

How do you calculate Compound Interest?

Back

To calculate Compound Interest, use the formula: CI = A - P, where A is the total amount after interest and P is the principal.

Front

If you invest $1,000 at a 5% annual interest rate for 3 years, what is the Simple Interest earned?

Back

The Simple Interest earned is $150.

Front

If you invest $1,000 at a 5% annual interest rate compounded annually for 3 years, what is the total amount?

Back

The total amount after 3 years is $1,157.63.

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 accumulated interest.

Front

What is the principal in the context of interest calculations?

Back

The principal is the initial amount of money invested or loaned, before any interest is added.

Front

What does the term 'rate of interest' mean?

Back

The rate of interest is the percentage at which interest is calculated on the principal amount.

Front

How does time affect Simple Interest?

Back

The longer the time period, the more Simple Interest will be earned, as it is directly proportional to time.