Simple and Compound Interest, Annuities, Stocks, and Bonds Quiz

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Questions and Answers

What is the formula for simple interest?

I = PRT (correct)
I = P(1 + RT)
I = P(1 - RT)
I = P/RT

What does 'P' represent in the simple interest formula?

Time period
Interest
Principal amount (correct)
Annual interest rate

If the principal amount is $500, the annual interest rate is 8%, and the time period is 3 years, what is the simple interest?

$120
$100
$96 (correct)
$60

What is compound interest?

Interest calculated on the initial principal and also on the accumulated interest of previous periods (A) Signup and view all the answers

In compound interest, what does 'n' represent in the formula for calculating the amount?

Number of times interest is compounded per year (B) Signup and view all the answers

What is an annuity?

A series of equal periodic payments or receipts (C) Signup and view all the answers

What are stocks?

Ownership shares in a corporation (C) Signup and view all the answers

What are bonds?

Debt instruments issued by governments or corporations (A) Signup and view all the answers

What is the relationship between bond prices and interest rates?

Inverse relationship; when interest rates rise, bond prices fall (A) Signup and view all the answers

If an investment grows at an annual compound rate of 5% for 3 years, how much will $500 grow to?

$500(1 + 0.05)^3$ (A) Signup and view all the answers

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Study Notes

Mathematics: Simple and Compound Interest, Annuities, Stocks, and Bonds

Simple Interest

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