Compound and Continuous Interest Worksheet
This worksheet covers compound and continuous interest calculations and concepts for 8th-grade financial literacy.
Includes
Standards
Topics
Compound and Continuous Interest
Name:
Date:
Score:
Read each question carefully and answer to the best of your ability. Show all your work for calculations.
1. Compound interest is calculated on the initial principal and also on the accumulated of previous periods.
2. The formula for compound interest is A = P(1 + r/n)^(nt), where 'n' represents the number of times is compounded per year.
3. Continuous compounding uses the mathematical constant 'e', and its formula is A = P * e^(rt), where 'e' is approximately equal to .
4. Which compounding frequency would yield the highest interest over one year?
Annually
Quarterly
Monthly
Daily
5. What is the principal amount if the total amount after 2 years at 5% annual interest compounded annually is $1102.50?
$1000
$1050
$1100
$1150
6. Imagine you invest $5000 at an annual interest rate of 4% compounded quarterly. What will be the total amount after 3 years? Show your calculations.
7. If you invest $1000 at an annual interest rate of 3% compounded continuously, what will be the amount after 5 years? (Use e ≈ 2.71828)
8. Continuous compounding always yields a higher return than daily compounding, given the same principal, rate, and time.
True
False
9. The 't' in the compound interest formula represents the total time in months.
True
False
10. Plot the growth of an initial investment of $1000 at an annual interest rate of 10% compounded annually for 3 years. Calculate the amount at the end of each year and plot the points.
Year 1:
Year 2:
Year 3: