Simple and compound interest formulas and personal finance math problems for a high school math course.
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- What is simple interest?
- Interest calculated only on the principal, not on accumulated interest
- State the simple interest formula
- I = Prt (Interest equals Principal times rate times time)
- In the simple interest formula, what does P represent?
- Principal, the initial amount of money borrowed or invested
- In the simple interest formula, what does r represent?
- The annual interest rate, expressed as a decimal
- In the simple interest formula, what does t represent?
- Time in years
- What is the formula for total amount with simple interest?
- A = P + I or A = P(1 + rt)
- What is compound interest?
- Interest earned on both principal and previously accumulated interest
- State the compound interest formula
- A = P(1 + r/n)^(nt)
- In the compound interest formula, what does n represent?
- Number of times interest is compounded per year
- How does compounding frequency affect total interest earned?
- More frequent compounding results in more total interest
- What is the effective annual rate (EAR)?
- The actual annual interest rate accounting for compounding periods
- What is present value?
- The current amount of money needed to reach a future goal
- What is future value?
- The value of an investment at a specified point in time
- What does APR stand for?
- Annual Percentage Rate, the stated yearly interest rate
- What does APY stand for?
- Annual Percentage Yield, the effective annual rate including compounding