Compound interest arises when interest is added to the principal of a deposit or loan. So that, from that moment on, the interest that has been added also earns interest. This addition of interest to the principal is called compound Interest.

Following are the important formulas to calculate compound Interest.

Let Principal = P, Rate = R% per annum, Time = n years
When interest is compound Annually:

Amount = P {1 + R/100}n

When interest is compounded Half-yearly:

Amount = P {1 +( R/2)/100}2n

When interest is compounded Quarterly:

Amount = P {1 +(R/4)/100}4n

When interest is compounded Annually but time is in fraction, says 3 2/5 years.

Amount = P {1 + R/100}3X {1 + (2/5R)/100}

When Rates are different for different years, say R1%, R2%, R3% for 1st, 2ndand 3rd year respectively

Then, Amount = P {1 + R1/100}X {1 + R2/100}X {1 + R3/100} X ………………………

[WpProQuiz 44]