Compound Interest Formula source.docx

This means we end up with 5000 16470095042509848

Info icon This preview shows pages 4–5. Sign up to view the full content.

This means we end up with: 5000 × 1.6470095042509848 = 8235.0475. You may have seen some examples giving a formula of A = P ( 1+r ) ^ t . This simplified formula assumes that interest is compounded once per period, rather than multiple times per period. The benefit of compound interest The full benefit of compound interest will become clear when I tell you that without it, your investment balance in the above example would be only $7,500 ($250 per year for 10 years, plus the original $5000) by the end of the term. So, thanks to the wonder of compound interest, you will gain an additional $735.05. Interactive compound interest formula Use the calculator below to show the formula and resulting compound interest calculation for your chosen figures. Note that this calculator requires JavaScript to be enabled in your browser. Principal amount (P): Annual rate (r): Compounds per year (n): Years (t): P ( 1 + r n ) ( n t ) = A For a comprehensive set of tools for calculating compound interest on your savings, please see our compound interest calculators .
Image of page 4

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

On the next page we look at the formula for compound interest with monthly contributions (how you can add a regular, additional monthly deposit) and the future value formula .
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.
  • Spring '11
  • Raskin
  • Psychology, compound interest formula

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern