How To Solve Compound Interest Problems

How To Solve Compound Interest Problems-1
A = P(1 r/n) I have an investment account that increased from ,000 to ,000 over 30 months.If my local bank offers savings account with daily compounding (365), what annual interest rate do I need to get from them to match the return I got from my investment account? The equation the calculator will use is: r = n[(A/P)1/nt - 1] and R = r*100.1 for certain time periods and rates of interest, calculated at both, simple and compound interest.

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In easy words, it can be said as "interest on interest".

It makes a deposit or loan grow faster as compared to simple interest.

This will save about a minute of your time, allowing you to solve an extra question and boost your score and percentile.

The concept behind this calculation is Equivalent Rate of Interest.

That's usually not the case in a real bank; you would probably compound continuously, but I'm just going to keep it a simple example, compounding annually. After two years, or a year after that first year, after two years, you're going to get 10% not just on the $100, you're going to get 10% on the $110.

There are other videos on compounding continuously. All that means is that let's say today you deposit 0 in that bank account. 10% on 110 is you're going to get another , so 10% on 110 is , so you're going to get 110 ... The general way to figure out how much you have after let's say n years is you multiply it. Let's say this is my original deposit, or my principle, however you want to view it. It's going to be, after three years, we're going to have 100 times 1.1 to the 3rd power, after n years. We're going to have 100 times 1.1 to the nth power. This was all the situation where we're dealing with 10%. Then after one year we would have 100 times, instead of 1.1, it would be 100% plus 7%, or 1.07. After 3 years, I could do 2 in between, it would be 100 times 1.07 to the 3rd power, or 1.07 times itself 3 times. I think you get the sense here that although the idea's reasonably simple, to actually calculate compounding interest is actually pretty difficult.

Using the compound interest formula, calculate principal plus interest or principal or rate or time.

Includes compound interest formulas to find principal, interest rates or final investment value including continuous compounding A = Pe^rt.

If you go by the Compound Interest formula, the calculation would become very difficult.

Calculate compound interest on an investment or savings.


Comments How To Solve Compound Interest Problems

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