Exploring Simple and Compound Interest Concepts

This video tutorial covers chapter 68, part two, focusing on simple and compound interest. It explains compound interest as the common form of interest in banks, where interest is calculated on the principal and accumulated interest. The tutorial demonstrates using tables for calculations and emphasizes not rounding off until the final balance. It also introduces the formula for compound interest, explaining how to use it with a calculator. The video includes examples and practice problems to reinforce learning.

What is compound interest primarily paid on?

• The original principal only

• The interest from the previous year only

• Both the original principal and the accumulated interest

• None of the above

How is the principal amount for the second year determined in compound interest?

• It remains the same as the first year

• It decreases by the amount of interest earned in the first year

• It increases by the amount of interest earned in the first year

• It is doubled

When calculating compound interest using a table, when should you round off the numbers?

• Never

• After each addition or subtraction

• Only at the final balance

• After calculating each year's interest

How many years was the compound interest calculated for in the table example?

• Two years

• Five years

• Three years

• Four years

What is the correct expression of a 5% interest rate as a decimal for compound interest calculations?

• 0.5

• 5

• 0.005

• 0.05

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

• The rate of interest

• The principal amount

• The final balance

• The number of compounding periods

What key on the calculator is used for raising to the power when calculating compound interest?

• The power key or y^x

• The square root key

• The percentage key

• The multiplication key

What is the initial principal amount in the example used to explain the compound interest formula?

• $120

• $132.30

• $575

• $630

What is the final balance after applying the compound interest formula in the first example?

• $138.92

• $132.30

• $126

• $732.80

When working with money and rounding off the final balance, to what should you round off?

• The nearest ten dollars

• The nearest cent

• The nearest hundred

• The nearest dollar