Worksheet designed to help students practice calculating simple and compound interest, featuring definitions, formula fill-ins, and application questions.
Simple and Compound Interest Practice Worksheet with fill-in-the-blank questions and formulas for calculating interest.
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Step-by-step solution for: 50 Simple and Compound Interest Worksheet
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Show Answer Key & Explanations
Step-by-step solution for: 50 Simple and Compound Interest Worksheet
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Here’s the full solution with explanations for each question:
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Answer: C. interest
✔ Explanation:
Interest is the money earned on a deposit or loan. When you keep money in a savings account, the bank pays you interest as a reward for using your money.
---
Answer: D. rate
✔ Explanation:
The interest rate determines how much interest is earned annually. For example, if the rate is 5%, then $100 earns $5 per year in interest.
---
Answer: A. principle
✔ Explanation:
The principal is the initial amount of money invested or borrowed. It's the starting point before any interest is added.
> Note: "Principle" is a common misspelling here — it should be principal (the financial term), not *principle* (a rule or belief). But since the option says "principle," and that's what's listed, we assume it's meant to be "principal."
---
a) Simple interest is paid on principal only.
b) Compound interest is paid on both principal and interest.
✔ Explanation:
- Simple interest is calculated only on the original principal.
- Compound interest is calculated on the principal and any accumulated interest from previous periods.
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Answer: I = P × r × t
✔ Explanation:
Where:
- I = Interest earned
- P = Principal (initial amount)
- r = Annual interest rate (as a decimal)
- t = Time in years
Example: If P = $100, r = 0.05 (5%), t = 3 years → I = 100 × 0.05 × 3 = $15
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Answer: A = P + I
or equivalently: A = P(1 + rt)
✔ Explanation:
The ending balance (also called the future value) is the original principal plus the interest earned.
So:
- A = P + I
- Since I = Prt → A = P + Prt = P(1 + rt)
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Answer: A = P(1 + r)^t
*(assuming annual compounding)*
✔ Explanation:
For compound interest, interest is added to the principal each period, so future interest is earned on both the original amount and previously earned interest.
- A = Final amount
- P = Principal
- r = Annual interest rate (decimal)
- t = Number of years
> Note: If compounding occurs more than once per year (e.g., quarterly), the formula becomes:
> A = P(1 + r/n)^(nt), where n = number of times compounded per year.
But for basic problems, A = P(1 + r)^t is often used for annual compounding.
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#### a) What does the "P" represent?
Answer: The principal (original amount invested or borrowed)
✔ Explanation:
"P" stands for Principal, the starting amount of money.
---
#### b) What does the "r" represent?
Answer: The annual interest rate (as a decimal)
✔ Explanation:
"r" is the interest rate per year. For example, 5% = 0.05.
---
#### c) What does the "t" represent?
Answer: The time in years
✔ Explanation:
"t" is the duration for which the money is invested or borrowed, measured in years.
---
| Question | Answer |
|--------|--------|
| 1 | C. interest |
| 2 | D. rate |
| 3 | A. principle (should be "principal") |
| 4a | Simple interest is paid on principal only. |
| 4b | Compound interest is paid on both principal and interest. |
| 5 | I = P × r × t |
| 6 | A = P + I or A = P(1 + rt) |
| 7 | A = P(1 + r)^t (for annual compounding) |
| 8a | P = Principal |
| 8b | r = interest rate (as a decimal) |
| 8c | t = time in years |
---
Let me know if you'd like this turned into a printable answer key or need examples worked out!
Here’s the full solution with explanations for each question:
---
1. The amount paid to a depositor for keeping their money in a savings account is called:
Answer: C. interest
✔ Explanation:
Interest is the money earned on a deposit or loan. When you keep money in a savings account, the bank pays you interest as a reward for using your money.
---
2. The ________ determines how much is paid to the depositor each year.
Answer: D. rate
✔ Explanation:
The interest rate determines how much interest is earned annually. For example, if the rate is 5%, then $100 earns $5 per year in interest.
---
3. The amount of the original investment is called:
Answer: A. principle
✔ Explanation:
The principal is the initial amount of money invested or borrowed. It's the starting point before any interest is added.
> Note: "Principle" is a common misspelling here — it should be principal (the financial term), not *principle* (a rule or belief). But since the option says "principle," and that's what's listed, we assume it's meant to be "principal."
---
4. Fill-in the appropriate words below:
a) Simple interest is paid on principal only.
b) Compound interest is paid on both principal and interest.
✔ Explanation:
- Simple interest is calculated only on the original principal.
- Compound interest is calculated on the principal and any accumulated interest from previous periods.
---
5. The formula for simple interest is:
Answer: I = P × r × t
✔ Explanation:
Where:
- I = Interest earned
- P = Principal (initial amount)
- r = Annual interest rate (as a decimal)
- t = Time in years
Example: If P = $100, r = 0.05 (5%), t = 3 years → I = 100 × 0.05 × 3 = $15
---
6. The formula for the ending balance on an account with simple interest is:
Answer: A = P + I
or equivalently: A = P(1 + rt)
✔ Explanation:
The ending balance (also called the future value) is the original principal plus the interest earned.
So:
- A = P + I
- Since I = Prt → A = P + Prt = P(1 + rt)
---
7. The formula for the ending balance on an account with compound interest is:
Answer: A = P(1 + r)^t
*(assuming annual compounding)*
✔ Explanation:
For compound interest, interest is added to the principal each period, so future interest is earned on both the original amount and previously earned interest.
- A = Final amount
- P = Principal
- r = Annual interest rate (decimal)
- t = Number of years
> Note: If compounding occurs more than once per year (e.g., quarterly), the formula becomes:
> A = P(1 + r/n)^(nt), where n = number of times compounded per year.
But for basic problems, A = P(1 + r)^t is often used for annual compounding.
---
8. In the simple interest formula I = P × r × t:
#### a) What does the "P" represent?
Answer: The principal (original amount invested or borrowed)
✔ Explanation:
"P" stands for Principal, the starting amount of money.
---
#### b) What does the "r" represent?
Answer: The annual interest rate (as a decimal)
✔ Explanation:
"r" is the interest rate per year. For example, 5% = 0.05.
---
#### c) What does the "t" represent?
Answer: The time in years
✔ Explanation:
"t" is the duration for which the money is invested or borrowed, measured in years.
---
✔ Summary of Answers:
| Question | Answer |
|--------|--------|
| 1 | C. interest |
| 2 | D. rate |
| 3 | A. principle (should be "principal") |
| 4a | Simple interest is paid on principal only. |
| 4b | Compound interest is paid on both principal and interest. |
| 5 | I = P × r × t |
| 6 | A = P + I or A = P(1 + rt) |
| 7 | A = P(1 + r)^t (for annual compounding) |
| 8a | P = Principal |
| 8b | r = interest rate (as a decimal) |
| 8c | t = time in years |
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Let me know if you'd like this turned into a printable answer key or need examples worked out!
Parent Tip: Review the logic above to help your child master the concept of compound interest worksheet.
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