Simple & Compound Interest
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Flashcards covering key concepts of simple and compound interest, definitions, formulas, and examples.
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10 Terms
Interest
The amount of money that we get for lending or investing money, or that we pay for borrowing money.
Principal
The amount of money deposited or borrowed.
Rate or Interest Rate
The charge for interest, given as a percentage, assumed to be per year.
Simple Interest
Interest calculated only on the principal, and it is only calculated once.
Simple Interest Formula
Interest = principal × rate × time (I = Prt).
Future Value
The total amount due when a loan is repaid, which includes principal plus interest.
Present Value
The initial value of an account, denoted P.
Compound Interest
Interest computed on the original principal as well as on any accumulated interest.
Compounding Period
The period of time between two interest payments.
Natural Number e
A mathematical constant approximately equal to 2.71828, significant in calculus and compound interest formulas.
Note 
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