Then find the balance after the given number of years. There are three ways you can calculate compound interest. I is one of the easiest topics in cat quantitative section. The mathematical formula for calculating compound interest depends on several. These factors include the amount of money deposited called the principal, the annual interest rate in decimal form, the. Simple interest is calculated using your initial investment only. Future value formula for compound interest the future value f after n interest.
Simple interest and compound interest formulas for cat pdf. Calculate final account balances using the formulas for com pound and continuous interest. Compound interest formula the formula for annual interest, including principal sum, is. It may help to examine a graph of how compound interest works. Derivation of compound interest formulas there is some logic to the creation of the compound interest formulas shown in illustration 101 of the text. End of interest earned amount at end of period year 1 50 550 5001. Rrb, 2009 the compound interest on a sum for 2 years is rs. Subtract the principal if you want just the compound interest. Simple interest is calculated only on the principal amount of a loan or. The compound interest rate r thus earns the same in a year as the simple interest. Compound interest invest 500 that earns 10% interest each year for 3 years, where each interest payment is reinvested at the same rate. If the compound interest on a certain sum for two years at 10% p. One 15th century writer in florence25 calculated the damage. The below compound interest formulas are used in this calculator in the context of time value of money to find the total interest payable on a principal sum at certain rate of interest over a period of time with either monthly, quarterly, halfyearly or yearly compounding period or frequency.
Compound interest, or interest on interest, is calculated with the compound interest formula. An application of exponential functions is compound. Cat aspirants are required to apply various formulas on simple interest and compound interest to solve various questions. Table 3 shows the effects of interest rates compounded quarterly on the future. Examples now lets solve a few compound interest problems. The total interest generated is the final value minus the initial principal. P principal or amount of money deposited r annual interest rate in decimal form. Multiply the principal amount by one plus the annual interest rate to the power of the number of compound periods to get a combined figure for principal and compound interest. Pdf compound interest was known to ancient civilisations, but as far as we know it was not until.
173 95 5 1169 830 1378 258 636 1017 1118 1236 1289 1334 819 43 1083 390 995 1487 741 240 1245 1246 533 37 821 834 922 999 611 539 350 1437 474 580