- Janak Singh Saud
Compound interest is the interest charged on the principal and accrued interest. When the interest becomes due, it is no paid to the money lender, but is added to the principal so that the amount at the end of each period is taken as the principal for the next period. This process is repeated until the amount for the whole period is found. The difference between the final amount and the original principal is called the compound interest. It is the interest charged on the growing principal. The compound amount is the sum of original principal and increased amount. Compound interest may be calculated yearly, half-yearly, quarterly, monthly, etc. If time period is not mentioned, we shall suppose that interest is payable yearly. When the time period is large or when the rate of interest is fractional, in that case the direct method of calculating compound interest/amount is more time consuming and tedious. In such a case, formula method for calculating compound interest/amount is more suitable. The compound amount is calculated by the formula : , where P = original principal R= rate of interest T = time period =======================================================================================================
User guidelines to do the following problem
Compound Amount Formula Practice
Test your understanding
What is the amount of an investment worth Rs. 35800 for 3 years compounded annually at the rate of 12% per annum ?