Compound Interest
- Formula / Rule
- Compound Interest
- Topic
- Arithmetic
- Formula
$$A = P\left(1 + \frac{R}{100}\right)^T$$
$$\text{CI} = A - P$$
For half-yearly compounding: $$A = P\left(1 + \frac{R}{200}\right)^{2T}$$
For quarterly compounding: $$A = P\left(1 + \frac{R}{400}\right)^{4T}$$
- When to Use
- Calculating interest when it is compounded annually, half-yearly, or quarterly.
- Worked Example
Q: Find the compound interest (CI) on $\text{NPR } 5,000$ at $10%$ per annum for $2$ years.
$$A = 5000 \times \left(1 + \frac{10}{100}\right)^2 = 5000 \times (1.1)^2 = 5000 \times 1.21 = \text{NPR } 6,050$$ $$\text{CI} = 6050 - 5000 = \text{NPR } 1,050$$