Different financial instruments might calculate it in various ways and other times youd need to do additional computations to figure out interest rates such as with credit card APRs. Simple interest is the interest generated only from the principal. But calculating compound interest is complicated and its usually not as easy as simply using the formula we provided above.
This rule of thumb tells you what it takes to double your money looking at the rate you earn and the length of time youll earn that rate.
So 4 would be 004 divided by n the number of times your interest is compounded in a given period. Formula for principal in compound interest 1 R100 where R rate. Compound interest includes the interest generated on the principal and the accumulated interest from any previous period. This formula is applicable if the investment is getting compounded annually means that we are reinvesting the money on an annual basis.