Questions and Answers
What is the formula for simple interest?
What does 'P' represent in the simple interest formula?
Principal amount borrowed
What is the formula for compound interest?
What does 'A' represent in the compound interest formula?
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What is the formula for continuously compounded interest?
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What does 'e' represent in the continuously compounded interest formula?
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Study Notes
Simple Interest Formula
- Simple interest is calculated using the formula I = PrT.
- I represents the total interest earned or paid.
- P stands for the principal amount borrowed or invested.
- r signifies the annual interest rate expressed as a decimal.
- T denotes the time period in years.
Compound Interest Formula
- Compound interest is determined by the formula A = P(1 + (r/n))^nt.
- A represents the total value of the account after interest is applied.
- P is the principal amount that is initially deposited or borrowed.
- r is the annual interest rate, also expressed as a decimal.
- n indicates how many times per year the interest is compounded.
- t is the total time in years for which the money is invested or borrowed.
Continuously Compounded Interest Formula
- Continuously compounded interest is calculated using the formula A = Pe^rt.
- A denotes the account value after interest has been accrued continuously.
- P is the initial principal amount before interest is applied.
- e is the base of the natural logarithm, approximately equal to 2.71828.
- r indicates the annual interest rate expressed as a decimal.
- t is the time in years for which the investment or loan exists.
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Description
This quiz covers key interest formulas used in Algebra 2. You'll learn the differences between simple interest, compound interest, and continuously compounded interest. Test your understanding of these essential concepts.
