FLASHCARD 15 SIMPLE AND COMPOUND INTEREST

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated on the principal amount only, without compounding. It is calculated using the formula: SI = P * r * t, where SI is the simple interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating Simple Interest is: SI = P * r * t.

Front

If you borrow $1000 at a simple interest rate of 5% per year for 3 years, how much interest will you pay?

Back

You will pay $150 in interest. (SI = 1000 * 0.05 * 3 = $150)

Front

What will be the total amount to be paid back if you borrow $2000 at 6% simple interest for 4 years?

Back

The total amount to be paid back will be $2480. (SI = 2000 * 0.06 * 4 = $480; Total = Principal + Interest = 2000 + 480 = 2480)

Front

How does the time period affect Simple Interest?

Back

The longer the time period, the more interest will accumulate, as interest is calculated based on the time the money is borrowed.

Front

What is the principal in the context of Simple Interest?

Back

The principal is the initial amount of money borrowed or invested before interest.

Front

If a bank offers a simple interest rate of 10% per year, how much interest will you earn on $5000 after 2 years?

Back

You will earn $1000 in interest. (SI = 5000 * 0.10 * 2 = $1000)

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 you have a loan of $1500 at a simple interest rate of 4% for 5 years, what is the total interest paid?

Back

The total interest paid will be $300. (SI = 1500 * 0.04 * 5 = $300)

Front

What is the total amount to be paid back on a loan of $800 at 3% simple interest for 6 years?

Back

The total amount to be paid back will be $944. (SI = 800 * 0.03 * 6 = $144; Total = 800 + 144 = 944)