The compound interest formula is the way that such compound interest is determined. Compound interest or interest on interest is calculated with the compound interest formula. This example assumes that 1000 is invested for 10 years at an annual interest rate of 5 compounded monthly.
If there are 12 compounding periods we would raise our 102 to the 12th power to get 127.
Compound interest accrues over the period a loan. Compound interest formulas to find principal interest rates or final investment value including continuous compounding A Pert. You need the beginning value interest rate and number of periods in years. To calculate compound interest in Excel you can use the FV function.