7. USAEO Financial Literacy

Simple And Compound Interest — Quiz

Test your understanding of simple and compound interest with 5 practice questions.

Practice Questions

Question 1

Suppose an initial principal of $P = 5000$ dollars is invested at an annual interest rate of 4% compounded annually. What will the total amount be after 3 years under compound interest?

Question 2

A loan of $8000$ dollars is taken at an annual simple interest rate of 5%. If the loan is to be repaid in 4 years, what is the total amount that must be repaid?

Question 3

What effective annual interest rate is equivalent to a nominal interest rate of 6% compounded quarterly?

Question 4

A savings account offers a 3% annual interest rate compounded monthly. If you deposit $2000$, how much will you have in the account after 5 years?

Question 5

Which of the following statements best describes the difference between simple and compound interest?