Flashcards in Compound Interest Deck (9):

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How is compound interest different from simple interest?

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Compound interest is the interest earn not only on the principal, but also on all the previous interest earn.

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What is the formula for calculating total amount using compound interest

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P = Principal

r = compound interest per year

n = number of years

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To calculate the compound interest, what must we do?

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We subtract the Principal from the Total amount.

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Calculate the Total amount from

Principal = $20000

Compound interest rate = 2%

No of years = 3

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Calculate the Compound interest from

Principal = $20000

Compound interest rate = 2%

No of years = 3

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Compound interest = $21224.16 - $20000

= $1224.16

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Calculate the Total amount from

Principal = $25000

Compound interest rate = 2.5%

No of years = 4

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Calculate the Compound interest from

Principal = $25000

Compound interest rate = 2.5%

No of years = 4

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Compound interest = $27595.32 - $25000

= $2595.32

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Calculate the Total amount from

Principal = $30000

Compound interest rate = 1.5%

No of years = 10

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Calculate the Compound interest from

Principal = $30000

Compound interest rate = 1.5%

No of years = 10

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Compound interest = $34816.22 - $30000

= $4816.22