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Compound InterestCovid-19 has led the world to go through a phenomenal transition . E-learning is the future today. Stay Home , Stay Safe and keep learning!!! Compound interest arises when interest is added to the principal , so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding .Note: The main difference between simple interest and compound-interest is that in case of simple interest, the principal remains the same throughout, whereas in the case of compound-interest, it goes on changing periodically. Example : 1)A bank account, for an account with $1000 initial principal and 20% interest per year would have Solution : I = P x r x t I = 1000 x 0.2 x 1 I = $200 A = P + I A= $1200 at the end of 1st year. I = P x r x t I = 1200 x 0.2 x 1 I = 240 A = P + I A= $1440 at the end of 2nd year and so on. Here we have counted interest on interest, but this is a bit longer method. So we will use a formula to calculate directly the amount say after 3 yrs., 4 yrs. and so on.
Where P = Principal r = rate in percent t = time period in years. I = Interest = A – P Example : 1) Find the compound-interest in $8000 for 2 years at 6% p.a. Solution : Principal = P = $8000, Rate = r = 6% = 6/100 = 0.06 and time period = t = 2 years
_________________________________________________________________ 2) Find the compound interest on $24,000 at 15% p.a for 2 ⅓ years. Solution : P = $24,000, R = 15% and Time = t = 2 ⅓ When time is in fraction then amount is given by the following formula. Amount after 2 ⅓ years = P ( 1 + r )2(1 + r/3) = 24000( 1 + 0.15) 2 ( 1 + 0.15/3) = 24000 x (1.15) 2 x ( 1 + 0.05) = 24000 x 1.3225 x 1.05 Amount = $ 33,327 ∴ C.I = Amount - P = 33,327 - 24,000 C.I = $ 9,327. _________________________________________________________________ Compound Interest (CI) • Find Compound- Interest when interest is compounded Half yearly • Find Compound- Interest when interest is compounded Quarterly • Find CI when interest is compounded annually but Rates are different • Finding Principal • Finding Time Period of Investment • Finding Rate of Interest 8th grade math Home Page Covid-19 has affected physical interactions between people. Don't let it affect your learning.
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