Exploring the Compound Interest Formula

What is the primary advantage of using the compound interest formula over tables for long-term investments?

• None of the above

• Reduces the principal amount

• Simplifies calculations

• Increases the total interest

In the formula A = P(1 + R)^n, what does 'P' represent?

• Number of periods

• Interest rate

• Total amount

• Principal amount

How much total money was in the account after 4 years in the example provided?

• $25,632.83

• $20,000

• $30,000

• $5,632.83

What does 'n' represent in the compound interest formula?

• Interest rate

• Principal amount

• Number of time periods

• Total amount

What was the total interest earned in the 4-year investment example?

• $4,500

• $6,000

• $5,632.83

• $5,000

For monthly compounding interest, how is the annual rate converted?

• Multiplied by 12

• None of the above

• Divided by 12

• Multiplied by 365

What is the new principal amount in the monthly compounding example?

• $10,000

• $2,939.07

• $8,939.07

• $6,000

How many months are in the time period for the 5-year investment compounded monthly?

• 5 months

• 12 months

• 120 months

• 60 months

What was the final value of the investment after 5 years with monthly compounding?

• $6,000

• $8,939.07

• $10,000

• $12,000

How does the compound interest formula help in financial calculations?

• None of the above

• Provides exact values quickly

• Estimates values approximately

• Only useful for short periods