Compound Interest

What is the compound interest on a principal amount of $5000 at an annual interest rate of 5% compounded monthly for 3 years?

• The compound interest is $336.54

• The compound interest is $795.85

• The compound interest is $906.44

• The compound interest is $807.36

Understanding the concept of compounding: Explain the difference between simple interest and compound interest with an example.

• Simple interest is calculated on the total amount, while compound interest is calculated only on the principal amount.

• Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal amount and also on the accumulated interest from previous periods.

• Simple interest is calculated annually, while compound interest is calculated monthly.

• Simple interest is always higher than compound interest.

Understanding the concept of compounding: How does the frequency of compounding affect the amount of interest earned?

• The frequency of compounding has no effect on the amount of interest earned

• The frequency of compounding decreases the amount of interest earned

• The frequency of compounding affects the amount of interest earned by increasing the number of compounding periods, which leads to higher interest earned.

• The frequency of compounding only affects the principal amount

Applying the compound interest formula: Use the compound interest formula to calculate the total amount accrued on a principal of $3000 at an interest rate of 4% compounded annually for 5 years.

Round the answer to the whole dollar. Do not use any symbols (dollar signs, commas, or decimal points).

Mathematical Equivalence

ON

Applying the compound interest formula: If the principal amount is $6000, the interest rate is 8% compounded annually and the time period is 3 years, calculate the total amount accrued using the compound interest formula.

• The total amount accrued is $7,627.49

• The total amount accrued is $5,500.21.

• The total amount accrued is $6,480.99.

• The total amount accrued is $7,266.44.

Solving compound interest problems: A principal amount of $4000 is invested at an interest rate of 7% compounded annually. How much will it be worth after 4 years? Round the answer to the whole dollar. Do not use any symbols (dollar signs, commas, or decimal points).

Mathematical Equivalence

ON

Solving compound interest problems: If $7000 is invested at an interest rate of 9% compounded annually, what will be the value of the investment after 6 years?

• The value of the investment after 6 years will be $11,740.

• The value of the investment after 6 years will be $6,849.13.

• The value of the investment after 6 years will be $12,933.11.

• The value of the investment after 6 years will be $8,516.27.

Compounded by period: What is the formula for calculating compound interest when it is compounded period, n?

Find the interest paid for borrowing $26,500 at 12% simple interest for 7 years. Round the answer to the whole dollar. Do not use any symbols (dollar signs, commas, or decimal points).

Mathematical Equivalence

ON

Find the interest earned for investing $1,350 at 4% simple interest for 3 years. Round the answer to the whole dollar. Do not use any symbols (dollar signs, commas, or decimal points).

Mathematical Equivalence

ON