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Question by  SuzyQ (17)

How do you compute compound interest?

I never really understood interest.

 +1 vote! +6 you voted Answer by  ProfStochastic (70) Compound interest happens when principle and interest are both earning interest. A simple formula is used to calculate the amount of money after t units of time is A = P (1 + r/n) ^(nt) where P is the initial principle, r is the numeric value for the interest rate, and n is the number of times interest is given.

 +1 vote! +5 you voted Answer by  symister (47) The formula is A = P(1 + r)^n, where A is the final amount, P is the principal, r is the rate, n is number of years.

 +1 vote! +5 you voted Answer by  Pam84 (330) Most simple exmaple I can think of: You are making 12% interest/year on \$100.00. It is compounded quarterly (every 4 months: at the end of the first 4 months you get 3% added to your 100.00 = \$103.00. The next 4 month junction you would get the next 3% added to your NEW total which would be \$3.09 leaving 106.09.

 +1 vote! +4 you voted Answer by  hmmm (290) I=prt. I is the amount of interest. P is the principle amount borrowed, r is the interest rate, ad t is the amount of time.