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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 Spring '11
 Staff
 Math, Calculus, compound, Mathematics of Finance, custom edition, Vera Klimkovsky

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