Category:

#banking

Compound interest

Compound interest is the interest paid on the original principal as well as on the already accrued interest on the loan.


Compound Interest Formula:
Total Amount = Principal x (1 + interest rate / 12)12 x number of years


For example, if an amount of $5,000 is deposited into an account with compound interest at an annual interest rate of 5%, compounded monthly, the value of the investment after 10 years can be calculated as follows:


Total Amount = 5000 x (1 + 0.05 / 12) 12 x 10 = 8235.05