Simple and Compound Interest

Front

What does the 'I' in the interest formula stand for?

Back

Interest

Front

What is the formula for calculating simple interest?

Back

Simple Interest (SI) = Principal (P) × Rate (R) × Time (T) / 100

Front

What is the formula for calculating compound interest?

Back

Compound Interest (CI) = Principal (P) × (1 + Rate (R)/n)^(n×Time (T)) - Principal (P), where n is the number of times interest is compounded per year.

Front

If Karla invests $1,000 at 6.75% compounded semi-annually for 15 years, how much will she earn?

Back

$2,706.86

Front

If Emilio borrows $1,200 at 8% compounded quarterly for 2 years, how much will he pay back?

Back

$1,405.99

Front

If Karla invests $1,000 at 6.75% simple interest for 15 years, how much will she earn?

Back

$2,012.50

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 the accumulated interest.

Front

What is the effective annual rate (EAR) for an investment compounded quarterly?

Back

EAR = (1 + (nominal rate / n))^n - 1, where n is the number of compounding periods per year.

Front

If Heather invests $8,000 in a CD at 4.1% compounded annually for 4 years, what is the value of the CD?

Back

$9,394.92

Front

What is the principal in the context of interest calculations?

Back

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