Exploring Simple and Compound Interest Concepts

This video tutorial covers the concepts of simple and compound interest. It begins with an introduction to interest, explaining that simple interest is calculated only on the initial principal, while compound interest is calculated on both the principal and previously earned interest. The video demonstrates how to solve simple interest problems using the formula I = PRT, with two examples provided. It then introduces compound interest, explaining the need to calculate interest multiple times over the investment period. An example is given to illustrate the process of calculating compound interest annually. The tutorial concludes with a reminder of the differences between simple and compound interest.

What does the 'P' in the simple interest formula represent?

• Profit earned

• Payment period

• Percentage rate

• Principal amount

How is the annual interest rate expressed in the simple interest formula?

• As a fraction

• As a whole number

• As a percentage

• As a decimal

What is the simple interest earned on $1,000 at 4.5% for 2 years?

• $200

• $90

• $180

• $45

What does the 'R' in the simple interest formula stand for?

• Revenue

• Rate

• Return

• Ratio

What is the correct formula for calculating simple interest?

• I = (P+R)T

• I = P + RT

• I = PRT

• I = PTR/100

How is time represented in the simple interest formula?

• Weeks

• Years

• Days

• Months

In the given example, what was Mr. Gable's simple interest rate for his loan?

• 4%

• 5%

• 6%

• 7%

How do you calculate compound interest for multiple years?

• Apply the simple interest formula repeatedly

• Calculate interest on the principal only

• Add the interest to the principal each year

• Multiply the principal by the rate once

What is the new principal after the first year in the compound interest example?

• $750

• $705

• $652.50

• $600

What is the total amount after two years in the compound interest example?

• $900

• $709.59

• $1000

• $800