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Questions and Answers
What is the main difference between simple interest and compound interest?
What is the main difference between simple interest and compound interest?
- Simple interest is calculated on the principal amount, while compound interest is calculated on the principal plus interest. (correct)
- Simple interest is calculated on the principal amount, while compound interest is calculated on the principal minus interest.
- Simple interest is always higher than compound interest.
- Simple interest is calculated for a shorter period, while compound interest is calculated for a longer period.
What is the formula to calculate the accumulated amount in compound interest?
What is the formula to calculate the accumulated amount in compound interest?
- A = P(1 - in)
- A = P(1 + in)
- A = P(1 - i)^n
- A = P(1 + i)^n (correct)
What is the purpose of using logarithms when solving for the time period in compound interest calculations?
What is the purpose of using logarithms when solving for the time period in compound interest calculations?
- To calculate the principal amount
- To calculate the interest rate
- To calculate the accumulated amount
- To simplify the calculation of the time period (correct)
What does the nominal interest rate reflect?
What does the nominal interest rate reflect?
What is the formula to solve for the time period (n) in compound interest calculations?
What is the formula to solve for the time period (n) in compound interest calculations?
What is the main difference between simple depreciation and compound depreciation?
What is the main difference between simple depreciation and compound depreciation?
What is the formula to calculate the value after depreciation using simple depreciation?
What is the formula to calculate the value after depreciation using simple depreciation?
What is the relationship between the effective annual interest rate (i) and the nominal interest rate (i(m))?
What is the relationship between the effective annual interest rate (i) and the nominal interest rate (i(m))?
What is the main purpose of using logarithms in compound interest calculations?
What is the main purpose of using logarithms in compound interest calculations?
If a principal amount of $100 is invested at a 5% annual compound interest rate, what will be the accumulated amount after 2 years?
If a principal amount of $100 is invested at a 5% annual compound interest rate, what will be the accumulated amount after 2 years?
What is the relationship between the effective annual interest rate and the nominal interest rate?
What is the relationship between the effective annual interest rate and the nominal interest rate?
What is the main difference between the formulas for simple and compound interest?
What is the main difference between the formulas for simple and compound interest?
If a machine depreciates at a rate of 10% per year, what will be its value after 3 years if its initial value is $10,000?
If a machine depreciates at a rate of 10% per year, what will be its value after 3 years if its initial value is $10,000?
What is the formula to calculate the value after depreciation using compound depreciation?
What is the formula to calculate the value after depreciation using compound depreciation?
If an investment triples in value over 5 years, what can be said about the interest rate?
If an investment triples in value over 5 years, what can be said about the interest rate?
What is the main purpose of using the nominal interest rate?
What is the main purpose of using the nominal interest rate?
A company invests $50,000 at an annual compound interest rate of 8%. How many years will it take for the investment to double?
A company invests $50,000 at an annual compound interest rate of 8%. How many years will it take for the investment to double?
A car's value depreciates at a rate of 15% per year. If its initial value is $20,000, what will be its value after 4 years?
A car's value depreciates at a rate of 15% per year. If its initial value is $20,000, what will be its value after 4 years?
A bank offers a nominal interest rate of 12% compounded quarterly. What is the effective annual interest rate?
A bank offers a nominal interest rate of 12% compounded quarterly. What is the effective annual interest rate?
If the accumulated amount of an investment is $75,000 and the principal amount is $50,000, what is the interest rate per period if the investment is compounded annually for 5 years?
If the accumulated amount of an investment is $75,000 and the principal amount is $50,000, what is the interest rate per period if the investment is compounded annually for 5 years?
A machine depreciates at a rate of 20% per year. If its initial value is $15,000, what will be its value after 2 years using the simple depreciation method?
A machine depreciates at a rate of 20% per year. If its initial value is $15,000, what will be its value after 2 years using the simple depreciation method?
If the effective annual interest rate is 9.5%, what is the nominal interest rate compounded semiannually?
If the effective annual interest rate is 9.5%, what is the nominal interest rate compounded semiannually?
A company invests $25,000 at an annual compound interest rate of 10%. How many years will it take for the investment to grow by 50%?
A company invests $25,000 at an annual compound interest rate of 10%. How many years will it take for the investment to grow by 50%?
If the value of a machine is $12,000 after 3 years and it depreciates at a constant rate, what was its initial value if the depreciation rate is 10% per year using the compound depreciation method?
If the value of a machine is $12,000 after 3 years and it depreciates at a constant rate, what was its initial value if the depreciation rate is 10% per year using the compound depreciation method?
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