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what is compound interest rate. R AP 1nt - 1 n 2 1 3655 - 1 365 013865 1387 per annum. Compound Interest Rate P 1i t P.
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R AP 1nt - 1 n 2 1 3655 - 1 365 013865 1387 per annum. Compound interest or interest on interest is calculated with the compound interest formula. This cycle leads to increasing interest and account balances at an increasing rate sometimes known as exponential growth.
It is the result of reinvesting interest rather than paying it out so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
Therefore if both simple and compound interests have the same rate the interest generated will always be higher when compounding. It is the result of reinvesting interest rather than paying it out so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. So in the above example in year two youd earn 1 percent on 1010 or 1010 in interest payouts.
