How to calculate Compound Interest in easy steps

How to calculate Compound Interest in easy steps

Compound interest what you earn on both your original money and on the interest you keep accumulating.

Compound interest allows your savings to grow faster over time.

Calculate compound interest by multiplying initial principal amount by 1 plus annual interest rate raised to the number of compound periods minus one.

Compound interest = total amount of principal and interest in future (or future value) minus principal amount at present (or present value)

The math formula would be CI= [P (1 + i)n] – P.

'P'  is the principal amount, 'i' is the annual interest rate and ; ‘n' is the number of compounding periods.

Take a three-year loan of $10,000 at an interest rate of 5% that compounds annually.

The compound interest calculation would be, $10,000 [(1 + 0.05)3 – 1] = $10,000 [1.157625 – 1] = $1,576.25.