Compound Interest Definition
Compound interest is the interest calculated on the principal and the interest earned previously. It is denoted by C.I. It is very useful for investment and loan repayment purposes. It is also known as “interest on interest”.
Compound interest is very useful in the banking and finance sectors and is also useful in other sectors. A few of its use are:
- Growth of the population of a country
- Value of investment over a period of time.
- For finding Inflated costs and the depreciated value of any article.
- For predicting the growth of any institution or country.
Compound Interest (C.I) = Amount – Principal
Compound Interest Formula
Compound Interest is the interest that is calculated against a loan or deposit amount in which interest is calculated for the principal as well as the previous interest earned.
The common difference between compound and simple interest is that in compound interest, interest is calculated for the principal amount as well as for the previously earned interest whereas simple interest depends only on the principal invested.
Table of Content
- What is Compound Interest?
- Compound Interest Formula
- How to Calculate Compound Interest?
- Compound Interest Formula – Derivation
- Half-yearly Compound Interest Formula
- Quarterly Compound Interest formula
- Monthly Compound Interest Formula
- Daily Compound Interest Formula
- Periodic Compounding Rate Formula
- Rule of 72
- Compound Interest of Consecutive Years
- Continuous Compounding Interest Formula
- Some Other Applications of Compound Interest
- Difference between Compound Interest and Simple Interest
- Compound Interest Examples
- Compound Interest – Practice Questions
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