Category 1: Simple & Compound Interest

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Last updated 7:46 PM on 7/9/26
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4 Terms

1
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What is the formula for calculating simple interest?

  • I = P r t

    • I = Interest earned/paid

    • P = Principal (initial amount)

    • r = Annual interest rate (as a decimal)

    • t = Time in years

2
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What are the two formulas for finding the Future Value (A) with simple interest?

  1. A = P + I (Principal + Interest)

  2. A = P(1 + rt) (Principal times the growth factor)

3
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What is the formula for Compound Interest?

  • A = P(1 + r/n)^(nt)

    • A = Future value of the account

    • P = Principal

    • r = Interest rate per year (as a decimal)

    • t = Time/Term in years

    • n = Number of times interest is compounded per year (e.g., 12 for monthly, 4 for quarterly, 365 for daily).

4
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How do you calculate just the interest earned (not the total future value) using compound interest?

Compound Interest = A - P (Future Value minus the original Principal).