What is the primary difference between simple interest and compound interest?

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any previously earned interest, meaning interest is calculated on interest.

Fill in the blank: The formula for calculating compound interest when interest is compounded annually is ___.

Compound Interest = Total amount – Principal

True or False: Compound interest is always less than simple interest over the same period at the same interest rate.

False. Compound interest is generally greater than simple interest over the same period at the same interest rate due to the effect of earning interest on interest.

What does it mean for interest to be compounded semi-annually?

When interest is compounded semi-annually, it means that the interest is calculated and added to the principal two times a year, effectively doubling the frequency of interest accumulation.

Riddle: I grow faster as time goes by, for I earn interest on the interest I apply. What am I?

Compound interest.

If an amount is compounded quarterly, how many times per year is the interest applied?

The interest is applied 4 times per year.

Fill in the blank: In the formula for calculating compound interest, when interest is compounded monthly, the value of n is ___.

12

Short answer: What is the effect of compounding frequency on the amount of interest earned?

The more frequently interest is compounded, the greater the total amount of interest earned, because interest is calculated on previously accumulated interest.

What is the formula for compound interest when time is expressed as a fraction, such as 2(3/2) years?

The formula remains the same, but the time variable must be adjusted to reflect the fraction, affecting the total amount calculated.

Calculate the amount if $1,000 is invested at a 5% annual interest rate compounded annually for 3 years.

The total amount would be $1,000(1 + 0.05)³ = $1,157.63.

What is the formula for calculating Simple Interest?

Simple Interest (SI) is calculated using the formula SI = P × r × t, where P is the principal amount, r is the rate of interest per year, and t is the time in years.

When calculating Compound Interest with different rates for different years, the total Amount can be expressed as ___ where P is the principal and I is the interest.

Amount = P + I

True or False: The total amount of money after applying interest is equal to the principal amount plus the interest accrued.

True

If the principal amount is $1000, the rate of interest is 5%, and the time period is 3 years, what is the Simple Interest?

The Simple Interest is calculated as SI = 1000 × 0.05 × 3 = $150.

Riddle: I can grow over time, but I am not a plant. I can multiply your money, but I am not a magician. What am I?

Interest

Fill in the blank: The formula for the Total Amount after applying interest is ___ = P + I.

Amount

What is the difference between Simple Interest and Compound Interest?

Simple Interest is calculated only on the principal amount throughout the entire period, while Compound Interest is calculated on the principal plus any interest that has already been added to it.