Learn how to calculate compound interest
Compound interest, unlike the simple one, is much more complex to calculate. In case of compound interest, the person gains interest on his original amount as well as all his past interests implying a faster cash growth. Here are tips to calculate compound interest
The formula for calculation is: A= P (1+i) t.
Here A = Amount i.e. the total sum you would owe or have. P= your principal i.e. the original sum. The “i” = yearly interest rate and “t” means term or time. For example, say you have borrowed 1000 USD for two years at ten percent compounded annually. It means:
P= 1000 USD, i= ten percent and t = two years. Hence as per the formula:
A= 1000 USD (1+ 10%) 2 years= 1000 USD * 1.21 = 1210 USD.
It implies that by the termination of two years, the person would owe 1210 USD and as the original borrowing amount was 1000 USD; the compound interest is 210 USD.
