Simple & Compound Interest

GC's photography business has taken off, and she has opened a savings account to deposit her earnings. Her account earns interest on the principal amount plus any previous interest earned.

• Alfie says that Ingrid's savings account earns simple interest.

• Ashlynn says that Ingrid's savings account earn compound interest.

Mrs. Nedd took an $8,000 personal loan for some home improvement projects. She can pay off the loan in 2 years with monthly payments of $354.56, or in 5 years with monthly payments of $154,66.

• Bernard says the 2-year term will save her $770.16 in interest.

• Bonnie says the 5-year term will save her $770.16 in interest.

Lucas estimates he will need $7,500 per year for college tuition. His parents can pay 75% of the cost, and he will need to cover the rest. If he has 4 years and wants to save enough to cover the first two years of his part, what is the minimum amount Lucas should save each month?

• Chandler says he should save at least $78.13 each month.

• Cassie says he should save at least $234.38 each month.

Coach Castle went the party store to buy decorations for an upcoming luau. At the checkout, she paid by swiping a card. The transaction will show up on a bill that she'll pay off later in the month.

• Dash says that Coach Castle paid with a debit card.

• Daphne says that Coach Castle paid with a credit card.

Ms. Wiggins made deposits into two savings accounts:

• - $2,000 in a simple interest account with a 5% interest rate
• - $4,000 in a compound interest account with 4% interest

Assuming she makes no additional deposits, or withdrawals; what will the combined value of the two accounts be after 10 years?

• Mrs. Wright says the combined value will be $8,920.98.

• Nurse Wright says the combined value will be $6,920.98.

Coach BA puts the same amount of principal into three different accounts earning simple interest for 12 months.

- One account earns $70 at 4%.

- The second account earns $87.50 at 5%.

- The third account is at 6% interest and earns $105.

How much money would Coach BA earn in a fourth account with the same principle and 9.5% simple interest?

• $157.55

• $166.25

• $17.50

• $183.75

Ms. Cornelius earns $11.25 each year on an investment. What is the rate of simple interest if her initial amount invested was $750?

• 6.7 %

• 66.7 %

• 1.5 %

• 15 %

What is the return on investment for a deposit of $5,000 compounded annually at an interest rate of 4% for 20 years?

• $ 5,955.62

• $ 10,955.62

• $ 4,872.68

• $ 9,872.68

When you buy a house you have the choice of 15, 20 or 30 year mortgages. What is the advantage of 15 year mortgage versus a 30 year mortgage at the same interest rate?

• The 15 year mortgage will have a lower monthly payment.

• The 15 year mortgage will accrue less interest.

• The 15 year mortgage will increase your credit score.

• There is no advantage. It is just personal preference.

Ms. Hartley puts $70,000 in an account that earns .4% interest compounded annually. How much interest will Ms. Hartley have earned in 20 years?

• $ 5,818

• $ 75,818

• $ 13,378.62

• $ 83,378.62