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math110_compound_interest_notes

# math110_compound_interest_notes - Mathematics of Finance...

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Mathematics of Finance Compound Interest Based on custom edition “Math: Applications for Business.” Prepared and summarized by Vera Klimkovsky. M a t h e m a t i c s : A p p l i c a t i o n s f o r B u s i n e s s Compound Interest is interest paid on interest already earned as well as on principal. Suppose that some principal amount is deposited at interest rate r per year. The interest for the next year is paid on the total amount on deposit at the end of the previous year. Year Principal Future Amount INTEREST SIMPLE INTEREST COMPOUND INTEREST

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Mathematics of Finance Compound Interest Based on custom edition “Math: Applications for Business.” Prepared and summarized by Vera Klimkovsky. M a t h e m a t i c s : A p p l i c a t i o n s f o r B u s i n e s s The Compound Amount is the total amount on deposit after t years. Compound Amount Formula: Note: This formula is used when interest is compounded annually (i.e. once a year) is the principal.
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