Simple Interest
What is the formula for calculating simple interest?
I = PRT
What is the formula for compound interest?
A=P(1+n/r)^nt (where ( A ) is the amount, ( P ) is principal, ( r ) is rate, ( n ) is the number of times interest is compounded per year, and ( t ) is time in years).
What is the formula for continuous compounding?
A=Pe^rt
How many months are in a year?
12 months
The most common form of compounding is.....
daily compounding
If you invest $1,000$1,000 at a simple interest rate of 5%5% for 33 years, how much interest will you earn?
$ 150
If you invest $1,000 at a 5% interest rate compounded annually for 33 years, how much will you have?
$1,157.63
If you invest $1,000 at a continuous compounding interest rate of 4% for 33 years, how much will you have?
$1,127.50
If you have 0.5 years, how many days is that approximately?
182.5
What does P mean in PRT
Principal - amount of money invested
If you have $2,500$2,500 at 4%4% simple interest for 55 years, what is the total amount after interest?
$3000
What happens to the total amount when you increase the frequency of compounding?
The total amount increases due to interest being calculated on previously earned interest more frequently.
Explain why continuous compounding is different than regular compounding.
Continuous compounding calculates interest an infinite number of times, resulting in a slightly higher total than traditional compounding methods.
Convert 33 years into days.
1,095
What is a savings account?
An account in which the bank pays interest for the use of money deposited.
Explain the difference between simple interest and compound interest.
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal and also on the accumulated interest.
How is compound interest different from simple interest over time?
Compound interest grows faster than simple interest because it earns interest on both the initial principal and the accumulated interest over time.
If you have $500 invested at 5% for 44 years, what will be the amount with continuous compounding?
$610.70
How would you convert 1.5 years into months?
18 months
What does APR stand for in banking?
Annual Percentage Rate
If you have a simple interest loan of $4,000at 6% for 22 years, how much do you owe after 22 years?
$4480
Calculate the amount for $2,000 invested at 3% compounded monthly for 22 years.
$2,123.40
If you have $500 invested at 5% for 44 years, what will be the interest with continuous compounding?
$110.70
If you need to convert 2 weeks into years, what is the conversion?
2/52≈0.0385 years
If you invest $1,000 and earn a 5% return, how much interest do you earn?
$50