Compound Interest

Compound Interest

Money is said to be lent at compound interest if the interest is not paid as soon as it falls due but is added to the principal after a fixed period, so that the amounts at the end of the period becomes the principal for the next period.


Compound Interest Terms

P = Principal.

R = Rate of interest (%).

T = Time.


Compound Interest Formulas

Amount = Principal + Interest.

Compound interest = Amount – P


Formula: To calculate Compound Interest Annually

Amount for compound interest = P 1 +   RT
 100
or
Compound interest = P 1 +   RT  – 1
 100


Formula: Compound Interest is Payable Half-Yearly

Amount = P 1 +   ( R / 2 )2T
    100

Formula: Compound Interest is Payable Quarterly

Amount = P 1 +   ( R / 4 )4T
    100

Formula: Compound Interest is Payable Annually but time is in Fraction

Let, Time =52 years.
3
Amount = P 1 +   R5 X 1 +  (2/3) R
 100  100

Formula: If Compound Interest rates for Successive Years are Different

Let, r1, r2, r3…are the rates for successive years.

Amount = P 1 +   r1 X 1 +   r2 X 1 +   r3
 100 100 100
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