Compound Interest (CI)
| CI = | P (1 + |
|
) nt | - P |
Principal
| P = |
|
Rate of Interest
| r = |
|
||||||
Amount
| A = | P (1 + |
|
) nt |
Compound Interest
And Multiply value of (r * 100) %
Compound Interest is the addition of Interest to the principal sum of a loan or deposits. It can also be said, it is the interest on Interest. Accumulated interest is added to the Principal amount. And each year when Compound Interest is calculated. It is calculated on the sum total of initial Principal amount and accumulated interest from previous years. Compound Interest is standard in finance and economies. There is exponential growth in compounding effect.
The formula is given below:
And the Amount formula is,
where, P = Principal , r = Rate of Interest , t = Time Period , n = Compounding frequency
The frequency could be yearly, half-yearly, Quarterly, Monthly, Weekly, Daily or Continuous (or not at all, unitil maturity).
Compound Interest
| Year Month | |
Principal
| Year Month | |
Rate of Interest
| Year Month | |
Time Per Year/Month (not Functional)
Result
C.I : 4885.21 Amount : 16885.21 INR| Units | Output |
|---|---|
| Principal : | 12000 INR |
| Rate : | 5 % |
| Time : | 7 Yr(s) |
What is Compound Interest ?
“Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.” - Albert Einstein.Compound Interest is the addition of Interest to the principal sum of a loan or deposits. It can also be said, it is the interest on Interest. Accumulated interest is added to the Principal amount. And each year when Compound Interest is calculated. It is calculated on the sum total of initial Principal amount and accumulated interest from previous years. Compound Interest is standard in finance and economies. There is exponential growth in compounding effect.
The formula is given below:
| CI = | P (1 + |
|
) nt | - P |
| A = | P (1 + |
|
) nt |
where, P = Principal , r = Rate of Interest , t = Time Period , n = Compounding frequency
What is Compounding Frequency ?
The Compounding frequency is the number of times per year (or rarely, Another unit of time). the accumulated interest is paid out, or capitalized (credited to the account), on a regular basis.The frequency could be yearly, half-yearly, Quarterly, Monthly, Weekly, Daily or Continuous (or not at all, unitil maturity).
| Parameter | SI | CI |
|---|---|---|
| Formula | SI = P*R*T / 100 | CI = P(1+r/n)nt - P |
| Principal Amount | Principal Amount is constant. | Principal Amount keeps varying during the entire borrowing/lending period. |
| Return | The return is much lesser than CI. | The return is higher. |
| Growth | There is uniform growth. | There is exponential growth. |
| Interest Charged | The Interest is charged only on Principal Amount. | The Interest is charged on its Principal and Accumulated interest. |