Simple and Compound Interest

What is the formula for calculating simple interest?

• I = P + RT

• I = PRT

• I = P/R + T

• I = P * R + T

If you invest $5000 at a 7% annual rate for 5 years, how much simple interest will you earn?

• $2500

• $1500

• $350

• $1750

What does compound interest calculate interest on?

• Only the principal amount

• Only the initial interest

• Both the principal and the interest earned

• None of the above

What is the final amount after applying compound interest on $5000 for 5 years at 7%?

• $6500

• $7500

• $7000

• $7200

Which type of interest typically results in a higher return?

• Compound interest

• Simple interest

• Both are the same

• Depends on the principal amount