Simple and compound interest

What is compound interest?

• Interest calculated only on the initial principal amount.

• Interest calculated on the initial principal and accumulated interest from previous periods.

• Interest that is not compounded over time.

• Interest that is calculated only at the end of the investment period.

How is compound interest calculated?

• Compound interest is calculated using the formula: A = P(1 + r/n)^(nt)

• Compound interest is calculated by multiplying the principal amount by the annual interest rate only.

• Compound interest is calculated by adding the principal amount to the interest earned each year without compounding.

• Compound interest is calculated using the formula: A = P(1 + r)^(nt), where A is the total amount.

What is simple interest?

• Interest calculated on the total amount including interest accrued

• Interest calculated only on the principal amount

• Interest that varies with the market rate

• Interest that is compounded annually

What is the formula for the total amount in compound interest when compounded annually?

• A = P(1 + r)^t, where A is the total amount, P is the principal, r is the annual interest rate, and t is the number of years.

• A = P(1 + rt), where A is the total amount, P is the principal, r is the annual interest rate, and t is the number of years.

• 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.

• A = P(1 + r)^2t, where A is the total amount, P is the principal, r is the annual interest rate, and t is the number of years.

What is the formula for calculating simple interest?

• I = P * r * t

• I = P + r + t

• I = P / (r * t)

• I = P * r - t

How is simple interest calculated?

• Simple interest is calculated using the formula: I = P * r * t

• Simple interest is calculated by multiplying the principal by the square of the rate and time.

• Simple interest is calculated by adding the principal to the rate and time.

• Simple interest is calculated using the formula: I = P + r + t.

If Jerry borrowed $4,000 for 5 years at 6% simple interest, how much interest does he owe?

• $800

• $1,000

• $1,200

• $1,500

What is the principal in the context of interest?

• The total amount of interest paid over time.

• The original sum of money borrowed or invested, before any interest is added.

• The amount of money earned from investments after interest is applied.

• The fees charged by a lender for processing a loan.

What is the difference between simple interest and compound interest?

• Simple interest is calculated on the principal only, while compound interest is calculated on the principal plus accumulated interest.

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

• Simple interest is always higher than compound interest over time.

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

If Julie borrowed $3,500 for 3 years at 7½% simple interest, how much interest does she owe?

• $500.00

• $600.00

• $787.50

• $900.00