Compound Interest

Compound Interest also attracts interest.

Example

P = 800

Interest year 1= 0.1 x 800= 80

New P = 800 + 80 = 880

Interest on 880 = 0.1 X 880 = 88

New P = 880 + 88 = 968

Calculation using Excel along with formula is given in the following slide:

Compound Interest Formula

S = Money accrued after n years also called compound amount

P = Principal

r  = Rate of interest

n = Number of periods

S = P(1 + r/100)^ n

Compound interest = S - P

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