Understanding Interest Calculations

What is the formula for calculating simple interest?

• Interest = Rate × Time

• Interest = Principal × Rate × Time

• Interest = Principal ÷ Rate × Time

• Interest = Principal + Rate + Time

If you invest $1,000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

• $150

• $75

• $200

• $100

What is the formula for calculating compound interest?

• A = P(1 + r)^t

• A = P(1 + rt)

• A = P(1 + r/n)^(n)

• A = P(1 + r/n)^(nt)

If you invest $1,000 at a compound interest rate of 5% compounded annually for 3 years, how much will you have at the end?

• 1100.50

• 1157.63

• 1000.00

• 1200.00

Compare the total amount earned from simple interest and compound interest for an investment of $1,000 at 5% over 3 years.

• Total amount from simple interest is $1,100 and from compound interest is $1,150.

• Total amount from simple interest is $1,200 and from compound interest is $1,250.

• Total amount from simple interest is $1,180 and from compound interest is $1,190.

• Total amount from simple interest is $1,150 and from compound interest is $1,157.63.

A loan of $2,000 is taken at a simple interest rate of 6% for 4 years. How much total amount will be paid back?

• $2480

• $3000

• $2600

• $2400

If you invest $500 at a compound interest rate of 4% compounded quarterly for 2 years, what will be the total amount?

• 541.43

• 500.00

• 600.00

• 550.25

Create a graph showing the growth of an investment of $1,000 at 5% simple interest versus 5% compound interest over 5 years.

• Simple Interest Total: $1,300; Compound Interest Total: $1,250

• Simple Interest Total: $1,200; Compound Interest Total: $1,300

• Simple Interest Total: $1,250; Compound Interest Total: $1,276.28

• Simple Interest Total: $1,500; Compound Interest Total: $1,400

If a person invests $2,500 at a compound interest rate of 3% compounded annually, how much will they have after 5 years?

• 2500.00

• 2898.19

• 3000.00

• 2750.50

Solve the following word problem: If you borrow $1,500 at a simple interest rate of 7% for 2 years, how much interest will you pay?

• $150

• $420

• $210

• $300