Comparing Simple and Compound Interest Skills Check Practice

Holly is taking out a loan in the amount of $10,000.  Her choices for the loan are a 4-year loan at 4% simple interest and a 6-year loan at 5% simple interest.  What is the difference in the amount of interest Holly would have to pay for each of these two loans?

• $1,600
• $3,000
• $4600
• $1,400

Olivia will deposit $1,530 in an account that earns 6% simple interest every year.  Her sister Melinda will deposit $1,500 in an account that earns 8% interest compounded annually.  The deposits will be made on the same day, and no additional money will be deposited or withdrawn from the accounts.  Which statement about the balances of Olivia's account and Melinda's account at the end of 3 years is true?

• Olivia's account will have about $5.40 more than Melinda's account.
• Olivia's account will have about $84.17 more than Melinda's account.
• Melinda's account will have about $5.40 more than Olivia's account.
• Melinda's account will have about $84.17 more than Olivia's account.

Isabella deposited $2,000 in an account that pays 5% simple annual interest.  After one year how much interest will her investment pay? 

• $2,100
• $100
• $10,000
• $400

Tamara invested $15,000 in an account that pays 4% annual simple interest.  Tamara will not make any additional deposits or withdrawals.  How much interest will Tamara earn on her investment at the end of 3 years?

• $1,800
• $600
• $450
• $1,873

Nicolas has $650 to deposit into two different savings accounts.
    1) Nicolas will deposit $400 into Account 1, which earns 3.5% annual simple interest.
    2) Nicolas will deposit $250 into Account 2, which earns 3¼% interest compounded annually.
Nicolas will not make any additional deposits or withdrawals.  Which amount is closest to the total balance of these two accounts at the end of 2 years?

• $672.13
• $695.00
• $694.25
• $694.51

Mr. Wilkins deposited $2,500 in a new account at his bank.
       *The bank pays 6.5% interest compounded annually on this account.
       *Mr. Wilkins makes no additional deposits or withdrawals.
Which amount is closest to the balance of the account at the end of 2 years?

• $2,835.56
• $2,513.00
• $2,662.50
• $2,825.00

If you are calculating the simple interest and you are given the time in months.  How can you find the time in years?

• divide 12 by the months
• divide the months by 12
• multiply 12 times the months
• change the months to a decimal

Holly is taking out a loan in the amount of $10,000.  Her choices for the loan are a 4-year loan at 4% simple interest and a 6-year loan at 5% simple interest.  What is the difference in the amount of interest Holly would have to pay for each of these two loans?

• $1,600
• $3,000
• $4600
• $1,400

Nicolas has $650 to deposit into two different savings accounts.
    1) Nicolas will deposit $400 into Account 1, which earns 3.5% annual simple interest.
    2) Nicolas will deposit $250 into Account 2, which earns 3¼% interest compounded annually.
Nicolas will not make any additional deposits or withdrawals.  Which amount is closest to the total balance of these two accounts at the end of 2 years?

• $672.13
• $695.00
• $694.25
• $694.51

Interest earned on both the principal and any previously earned interest is...

• Compound Interest

• Simple Interest

• Interest Rate

• Principal