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Questions and Answers
What is the formula for compound interest when compounded quarterly?
What is the formula for compound interest when compounded quarterly?
- a(1 + r/2)^2c
- a(1 + r/12)^12c
- a(1 + r)^c
- a(1 + r/4)^4c (correct)
The formula for continuously compounded interest is A = Pe^rt.
The formula for continuously compounded interest is A = Pe^rt.
True (A)
What does the variable 'n' represent in the compounded interest formula?
What does the variable 'n' represent in the compounded interest formula?
The number of times interest is compounded per year.
For simple interest calculated once a year, the formula is ___.
For simple interest calculated once a year, the formula is ___.
Match the type of compounding frequency with its corresponding formula:
Match the type of compounding frequency with its corresponding formula:
What does 'e' represent in the formula for continuously compounded interest?
What does 'e' represent in the formula for continuously compounded interest?
Flashcards
Principal (P)
Principal (P)
The initial amount of money invested or borrowed, which earns interest.
Annual Interest Rate (r)
Annual Interest Rate (r)
The rate at which your principal grows per year, expressed as a decimal. For example, a 5% interest rate would be r = 0.05.
Time (t)
Time (t)
The amount of time the money is invested or borrowed for, expressed in years.
Continuously Compounded Interest Formula
Continuously Compounded Interest Formula
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Compound Interest Formula
Compound Interest Formula
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Simple Interest Formula
Simple Interest Formula
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