Information

A compound interest is interest which calculated not only from initial principal, but also in addition of previous interest.

For example:

My principal is $10,000 the annual interest rate is 1% and invest it with period of 2 years, the calculation is:

First year:

Second year:

Therefore the final amount is $10,201 and total earnings is $201

The above calculation can be generalize by:

where:

A is final amount

P is principal (initial investment)

r is annual nominal interest rate

t is number of years

n is number of compounding periods per year (e.g. it is 12 for monthly compounding)

For compound continuously, the equation is:

where:

A is final amount

P is principal (initial investment)

r is annual nominal interest rate

t is number of years

e is e constant or Euler's number which is roughly equals to 2.718281828459