Flashcards on Simple and compound interest
Simple and Compound Interest Explained for Students
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Interest Calculation
21 cards
Card 1
Question: What is the definition of interest in financial terms?
Answer: Interest is the cost of borrowing money or the reward for lending money.
Card 2
Question: What is the principal in the context of interest calculation?
Answer: The principal is the initial amount of money borrowed or invested.
Card 3
Question: What are the two primary types of interest?
Answer: Simple interest and compound interest.
Card 4
Question: How is simple interest calculated?
Answer: Simple interest is calculated only on the principal amount of a loan or deposit.
Card 5
Question: What is the formula for calculating simple interest (I)?
Answer: I = P ⋅ r ⋅ t
Card 6
Question: In the simple interest formula I = P ⋅ r ⋅ t, what does 'P' represent?
Answer: P = Principal (the initial amount of money, in the currency unit)
Card 7
Question: In the simple interest formula I = P ⋅ r ⋅ t, what does 'r' represent?
Answer: r = Annual Interest Rate (expressed as a decimal)
Card 8
Question: In the simple interest formula I = P ⋅ r ⋅ t, what does 't' represent?
Answer: t = Time (the duration of the loan or investment, in years)
Card 9
Question: How do you calculate the total future value (A) with simple interest?
Answer: A = P + I or A = P ⋅ (1 + r ⋅ t)
Card 10
Question: If you invest 1,000 USD at an annual simple interest rate of 5% for 3 years, what is the simple interest earned?
Answer: 150 USD