What is compound interest

The video tutorial introduces compound interest, explaining the concept of making an initial deposit and earning interest on both the principal and previously earned interest. It covers key components such as the principal amount, annual rate of return, compounding frequency, and time period. The tutorial also provides a detailed explanation of the compound interest formula, emphasizing how to calculate the final value of an investment over time.

What is the initial deposit called in the context of compound interest?

• Principal

• Rate

• Interest

• Time

Which component represents the annual rate of return in compound interest?

• R

• P

• T

• N

How is the number of times interest is compounded per year represented?

• P

• T

• R

• N

What does the 'T' in the compound interest formula stand for?

• Time in years

• Number of times compounded

• Rate

• Principal

Which of the following correctly represents the compound interest formula?

• A = P + (R * N * T)

• A = P + R/N

• A = P * R * N * T

• A = P * (1 + R/N)^(N*T)