Applications

Question 1

What is interest?

Answer 1

Interest is money paid for the use of other money

Question 2

What is simple interest?

Answer 2

Interest based only on the ititial deposit without compounding.

End value = P[1+(rt)/100]

Question 3

What is the principal in an interest problem?

Answer 3

Principal is the initial deposit in an investment.

Question 4

What is compound interest?

Answer 4

Compound interest is interest that is added at regular intervals. The second interest is based on the principal and the first interest and so on.

End value = P(1 + r/100)^t

Or

End value = P(1 + r/(100n))^(t*n)

If the interest is compounded n times per year. t is the time in years, p is the principal, and r is the interest rate