Simple and Compound Interest Practice Worksheet for learning financial math concepts.

Let’s go through each question one by one. I’ll explain what each term means and how to fill in the blanks correctly.

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Question 1:
*The amount paid to a depositor for keeping their money in a savings account is called ______.*

This is the reward you get from the bank for letting them use your money. That’s called interest.

✔ Answer: C. interest

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Question 2:
*The ______ determines how much is paid to the depositor each year.*

This refers to the percentage rate that tells you how much interest you earn per year — like 3% or 5%. That’s the rate.

✔ Answer: D. rate

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Question 3:
*The amount of the original investment is called: ______*

This is the starting amount you put into the account — before any interest is added. That’s the principle (sometimes spelled “principal” — but here it’s written as “principle”).

✔ Answer: A. principle

*(Note: In finance, it’s usually spelled “principal,” but since the worksheet uses “principle,” we’ll go with that.)*

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Question 4:
*Fill-in the appropriate words below:*

a) ______ interest is paid on principle only
→ This is simple interest — it doesn’t grow on top of itself.

b) ______ interest is paid on both principle and interest.
→ This is compound interest — you earn interest on your interest!

✔ Answers:
a) Simple
b) Compound

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Question 5:
*The formula for simple interest is:*

Simple Interest = Principle × Rate × Time
We write it as:
I = p × r × t

✔ Answer: I = p × r × t

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Question 6:
*The formula for the ending balance on an account with simple interest is:*

Ending Balance = Original Amount + Interest Earned
So:
A = p + (p × r × t)
Or simplified:
A = p(1 + rt)

✔ Answer: A = p(1 + rt)
*(You can also write it as A = p + prt — both are correct.)*

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Question 7:
*The formula for the ending balance on an account with compound interest is:*

Compound interest grows faster because it earns interest on interest. The formula is:

A = p(1 + r)^t

Where:
- A = final amount
- p = principal
- r = annual interest rate (as a decimal)
- t = time in years

✔ Answer: A = p(1 + r)^t

*(Note: If compounding happens more than once a year, the formula changes slightly — but this worksheet seems to assume annual compounding, so we’ll stick with this version.)*

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Question 8:
*In the simple interest formula I = p × r × t:*

a) What does the “p” represent?
→ It’s the original amount invested or borrowed — the principle.

b) What does the “r” represent?
→ It’s the interest rate per year, written as a decimal (like 0.05 for 5%).

c) What does the “t” represent?
→ It’s the time the money is invested or borrowed, usually in years.

✔ Answers:
a) Principle (original amount)
b) Rate (annual interest rate as a decimal)
c) Time (in years)

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Final Answer:

1. C. interest
2. D. rate
3. A. principle
4. a) Simple; b) Compound
5. I = p × r × t
6. A = p(1 + rt) [or A = p + prt]
7. A = p(1 + r)^t
8. a) Principle; b) Rate; c) Time