Compounded Interest

The site is here to help you understand compounded interest

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How-To

You take the formula A=P(1+r/n)^nt and plug in the numbers accordingly.


Example:

Annual compound interest formula. If an amount of $5,000 is deposited into a savings account at an annual interest rate of 5%, compounded monthly, the value of the investment after 10 years can be calculated as follows... P = 5000. r = 5/100 = 0.05
Introduction to compound interest

Notes

Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on. This addition of interest to the principal is called compounding.


You use the formula A=P(1+r/n)^nt and plug in the numbers.


A= The final amount

P= Original investment

r= interest rate

t= time in years of investment

n= number of times it is compunded

Compounded Continuously

    The process of earning interest on top of interest. The interest is earned constantly, and immediately begins earning interest on itself.

    An amount of $2,340.00 is deposited in a bank paying an annual interest rate of 3.1%, compounded continuously. Find the balance after 3 years. Solution. Use the continuous compound interest formula, A = Pe rt, with P = 2340, r = 3.1/100 = 0.031, t = 3.


Formula for continuously compounding interest
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