Annual interest can be calculated using the formula $I = P \times r$, where $I$ is the interest, $P$ is the principal amount, and $r$ is the annual interest rate.
The annual interest rate is often expressed as a percentage and can be converted to a decimal for calculations.
In sequences and series, annual interest can be used to determine future values of investments or loans through geometric progressions.
The concept of compound interest involves applying annual interest multiple times over different periods, leading to exponential growth.
Understanding how to manipulate formulas involving annual interest rates is essential for solving real-world financial problems in algebra.
Review Questions
What formula do you use to calculate simple annual interest?
How does compound interest differ from simple annual interest?
In what type of progression would you use annual interest rates to predict future values?
Related terms
Principal: The initial amount of money invested or loaned before any interest is applied.