How To Solve Compound Interest Problems

How To Solve Compound Interest Problems-63
Enter: Total P I (A): ,000 Principal (P): ,000 Compound (n): Daily (365) Time (t in years): 2.5 years (2.5 years is 30 months) Your Answer: R = 3.8126% per year Interpretation: You will need to put ,000 into a savings account that pays a rate of 3.8126% per year and compounds interest daily in order to get the same return as your investment account.Male Voice: What I want to do in this video is talk a little bit about compounding interest and then have a little bit of a discussion of a way to quickly, kind of an approximate way, to figure out how quickly something compounds.

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A = P(1 r/n) I have an investment account that increased from $30,000 to $33,000 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.

Compound Interest is calculated on the initial payment and also on the interest of previous periods.

Example: Suppose you give \$100 to a bank which pays you 10% compound interest at the end of every year.

If we wait one year, and you just keep that in the bank account, then you'll have your $100 plus 10% on your $100 deposit. That was, you can imagine, your deposit entering your second year, then you get plus 10% on that, not 10% on your initial deposit. You get interest on the interest from previous years. Every year the amount of interest we're getting, if we don't withdraw anything, goes up. After x years, so after one year you would just multiply it ... Just to get the math here, to get to this number right here, we just multiplied that number right there is 100 times 1 plus 10%, or you could say 1.1. If we were dealing in a world with let's say it's 7%. Even more, let's say I were to ask you how long does it take to double your money?

To get to this number right here you multiply it by 1.1. This number right here is going to be, this 110 times 1.1 again. We have 100% of our original deposit plus another 10%, so we're multiplying by 1.1. If you were to just use this math right here, you'd have to say, gee, to double my money I would have to start with 0.In easy words, it can be said as "interest on interest".It makes a deposit or loan grow faster as compared to simple interest.1 for certain time periods and rates of interest, calculated at both, simple and compound interest. It's free money that you earn just by keeping your money in a safe place.If you go by the Compound Interest formula, the calculation would become very difficult. Calculate compound interest on an investment or savings.This is a list of the example problems which can be solved by using this calculator.Example 1: What will a deposit of $4,500 at 7% compounded yearly interest be worth if left in the bank for 9 years?Compound Interest problems can become tricky and very confusing at times. 8248Answer – Br = rate of interestt = Time period The above equation will take time for simplification.There may be questions asked in your Bank and Insurance as well as Placement exams where you have to find out Compound Interest given the Principal Amount, the time (or duration) and the Rate of Interest. But if we will go by equivalent rate of interest, it will save our time.

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