How do you compute compound interest?

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.

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.

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.

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.