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what is the compound interest rate formula. Initial investment 1 annual interest rate2 years 2 Well still be using the same factors for this example. Amount Principal 1Rate100n where P is equal to Principal Rate is equal to Rate of Interest n is equal to the time Period Compound Interest Formula Derivation.
Rule Of 72 This Formula Is Useful For Financial Estimates And Understanding The Nature Of Compound Interest Take Your Int Finance Investing Compound Interest from www.pinterest.com
Suppose a principal amount of 1500 is deposited in a bank paying an annual interest rate of 43 compounded quarterly. The formula for compound interest is P 1 rn nt where P is the initial principal balance r is the interest rate n is the number of times interest is compounded per time period and t is the number of time periods. Compound interest includes the interest generated on the principal and the accumulated interest from any previous period.
To solve the compound interest for other time periods all you have to do is change the Number of compounding periods per year.
The compound interest formula contains the annual percentage yield formula of This is due to the annual percentage yield calculating the effective rate on an account based on the effect of compounding. The Excel compound interest formula in cell B4 of the spreadsheet on the right once again calculates the future value of 100 invested for 5 years with an annual interest rate of 4. N Number of times the interest is being compounded per unit. The formula for compound interest is P 1 rn nt where P is the initial principal balance r is the interest rate n is the number of times interest is compounded per time period and t is the number of time periods.
