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Compound InterestCovid19 has led the world to go through a phenomenal transition . Elearning 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 compoundinterest is that in case of simple interest, the principal remains the same throughout, whereas in the case of compoundinterest, 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 compoundinterest 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 Covid19 has affected physical interactions between people. Don't let it affect your learning.
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