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Compound Interest Practice

Last updated over 3 years ago
10 questions
Here is the formula for compound interest:
A = Account balance after interest is earned
P = Principal (starting amount)
r = interest rate (as a decimal)
n = compounding factor (number of times per year the interest is calculated)
t = time in years
1

Your 2 year investment of $5,300 earns 2.9% and is compounded annually. What will your total return be?

1

You invested $100 at 8.2% which is compounded annually for 7 years. How much will your $100 be worth in 7 years?

1

Your investment of $18,100 at 13.6% compounded quarterly for 7½ years will be worth how much?

Joe deposits $14000 in an account earning 2% interest for 20 years.

Let's compare how the different forms of interest change the amount that Joe could earn.
1

What would his final balance be if Joe earned simple interest?

1

How much would Joe earn if the interest was compounded annually?

1

How much would Joe earn if the interest was compounded monthly?

1

How much would Joe earn if the interest was compounded daily?

1

How does the compounding factor affect the amount of interest that Joe earns?

1

If we kept increasing the compounding factor do you think that Joe's earnings would keep increasing or would we hit a limit?

1

BONUS: How much would Joe earn if the interest was compounded every second?