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 +	R		^T
					100

Compound interest	=	P			1 +	R		^T	– 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	=	5	2	years.
			3

Amount

1 +

⁵

1 +

(2/3) R

100

Formula: If Compound Interest rates for Successive Years are Different

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

Amount

1 +

r₁

1 +

r₂

1 +

r₃

100