Compound Interest Expressions

Front

Change 6.75% to a decimal.

Back

.0675

Front

What does the r stand for in the compound interest formula?

Back

Rate

Front

You borrowed $59,000 for 2 years at 11% compounded annually. What total will you pay back?

Back

$72,693.90

Front

Riley invested $1,000 in savings bonds. If the bonds earn 6.75% interest compounded semi-annually, how much total will Riley earn in 15 years?

Back

$2,706.86

Front

What does the n stand for in the compound interest formula?

Back

The number of times compounded per year

Front

What is the formula for compound interest?

Back

A = P(1 + r/n)^(nt) where A is the amount, P is the principal, r is the rate, n is the number of times interest is compounded per year, and t is the time in years.

Front

If you invest $500 at an interest rate of 5% compounded annually for 3 years, what is the total amount?

Back

$578.81

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 and also on the accumulated interest.

Front

If the interest rate is 8% compounded quarterly, what is the effective annual rate (EAR)?

Back

The EAR is approximately 8.24%.

Front

How does increasing the compounding frequency affect the total amount earned?

Back

Increasing the compounding frequency results in a higher total amount earned due to interest being calculated on previously accumulated interest more frequently.