MONEY
- COMPOUND INTEREST MONEY
- COMPOUND INTEREST
Compound Interest: A quoted interest rate on a capital amount for a certain term produces interest at every interest payment interval. The interest is added to the capital for calculation of interest for the next period. The interest payment on the capital can be quarterly, yearly, monthly or some other term. At the end of the term the capital and the compound interest earned is returned. In the example below, the capital of 1000 at 10 percent interest is invested for 5 years with interest payable yearly.
| Capital | Interest Rate % | year | Interest Earned | New Capital = Capital + Interest Earned |
| 1000 | 10 | 1st | 1000 x 10 x 1 / 100 = 100 | 1000 + 100 = 1100 |
| 1100 | 10 | 2nd | 1100 x 10 x 1 / 100 = 110 | 1100 + 110 = 1210 |
| 1210 | 10 | 3rd | 1210 x 10 x 1 / 100 = 121 | 1210 + 121 = 1331 |
| 1331 | 10 | 4th | 1331 x 10 x 1 / 100 = 133.1 | 1331 + 133.1 = 1464.1 |
| 1464.1 | 10 | 5th | 1464.1 x 10 x 1 / 100 = 146.41 | 1464.1 + 146.41 = 1610.51 |
| Compound Interest earned in 5 years | 100+110+121+133.1+146.41 = 610.51 | Total Return = 1000 + 610.51 = 1610.51 | ||
Compound Interest Calculator:
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