25th November 2019

purplemath
16

What does interest compounded monthly mean?

One very important exponential equation is the compound-interest formula: If interest is compounded yearly, then n = 1; if semi-annually, then n = 2; quarterly, then n = 4; monthly, then n = 12; weekly, then n = 52; daily, then n = 365; and so forth, regardless of the number of years involved.

Similarly, it is asked, what is the compound interest formula?

P = principal amount (the initial amount you borrow or deposit) r = annual rate of interest (as a decimal) t = number of years the amount is deposited or borrowed for. A = amount of money accumulated after n years, including interest.

How do you work out compound interest?

To answer this question you begin by working out 5% of £250 which = £12.50. To calculate the amount of simple interest over 5 years you simply multiply the interest earnt in year one by five - £12.5 × 5 = £62.5. If you deposit £1,000 in a bank account which is paying 3% compound interest per year.

What is the formula for compound interest in Excel?

Compound Interest Formula in Excel
  • P is the initial amount invested;
  • r is the annual interest rate (as a decimal or a percentage);
  • n is the number of periods over which the investment is made.
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