Comparing Simple and Compound Interest

Front

What is Simple Interest?

Back

Simple Interest is calculated using the formula: I = P * r * t, where I is the interest, 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 is calculated on the initial principal, which also includes all of the accumulated interest from previous periods. The formula is A = P (1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest.

Front

How do you calculate Simple Interest?

Back

To calculate Simple Interest, use the formula: I = P * r * t.

Front

How do you calculate Compound Interest?

Back

To calculate Compound Interest, use the formula: A = P (1 + r/n)^(nt), where A is the total 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 difference between Simple 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 Tamara invests $15,000 at 4% simple interest for 3 years, how much interest will she earn?

Back

Tamara will earn $1,800 in interest.

Front

If Mr. Wilkins deposits $2,500 at 6.5% compounded annually for 2 years, what will be the balance?

Back

The balance will be approximately $2,835.56.

Front

What is the total balance of two accounts with $400 at 3.5% simple interest and $250 at 3.25% compounded annually after 2 years?

Back

The total balance will be approximately $694.51.

Front

If Olivia deposits $1,530 at 6% simple interest and Melinda deposits $1,500 at 8% compounded annually for 3 years, who will have more money?

Back

Melinda's account will have about $84.17 more than Olivia's account.

Front

What is the interest difference between a 4-year loan at 4% simple interest and a 6-year loan at 5% simple interest on a $10,000 loan?

Back

The difference in interest paid will be $1,400.