Compound Interest

What Is Compound Interest?

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes
all of the accumulated interest of previous periods of a deposit or loan. Thought to have originated in 17th
century Italy, compound interest can be thought of as “interest on interest,” and will make a sum grow at a
faster rate than simple interest, which is calculated only on the principal amount.

The rate at which compound interest accrues depends on the frequency of compounding, such that the higher
the number of compounding periods, the greater the compound interest. Thus, the amount of compound
interest accrued on $100 compounded at 10% annually will be lower than that on $100 compounded at 5%
semi-annually over the same time period. Since the interest-on-interest effect can generate increasingly positive
returns based on the initial principal amount, it has sometimes been referred to as the "miracle of compound
interest."

Calculating Compound Interest

Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate
raised to the number of compound periods minus one. The total initial amount of the loan is then subtracted
from the resulting value.

The formula for calculating compound interest is:

Compound Interest = Total amount of Principal and Interest in future (or Future Value) less Principal amount at
present (or Present Value)

= [P (1 + i)n] – P

= P [(1 + i)n – 1]

(Where P = Principal, i = nominal annual interest rate in percentage terms, and n = number of compounding
periods.)

Take a three-year loan of $10,000 at an interest rate of 5% that compounds annually. What would be the
amount of interest? In this case, it would be: $10,000 [(1 + 0.05)3 – 1] = $10,000 [1.157625 – 1] = $1,576.25.

KEY TAKEAWAYS

 Compound interest (or compounding interest) is interest calculated on the initial principal, which also
includes all of the accumulated interest of previous periods of a deposit or loan.
 Compound interest is calculated by multiplying the initial principal amount by one plus the annual
interest rate raised to the number of compound periods minus one.
 Interest can be compounded on any given frequency schedule, from continuous to daily to annually.
 When calculating compound interest, the number of compounding periods makes a significant
difference.
Growth of Compound Interest
Using the above example, since compound interest also takes into consideration accumulated interest in
previous periods, the interest amount is not the same for all three years, as it would be with simple interest.
While the total interest payable over the three-year period of this loan is $1,576.25, the interest payable at the
end of each year is shown in the table below.

Compounding Periods
When calculating compound interest, the number of compounding periods makes a significant difference. The
basic rule is that the higher the number of compounding periods, the greater the amount of compound interest.

The following table demonstrates the difference that the number of compounding periods can make for a
$10,000 loan with an annual 10% interest rate over a 10-year period.

Excel Compounding Calculation

If it's been a while since your math class days, fear not: There are handy tools to help figure compounding. Many
calculators (both handheld and computer-based) have exponent functions that can be utilized for these
purposes. If more complicated compounding tasks arise, they can be done using Microsoft Excel — in three
different ways.

1. The first way to calculate compound interest is to multiply each year's new balance by the interest
rate. Suppose you deposit $1,000 into a savings account with a 5% interest rate that compounds
annually, and you want to calculate the balance in five years. In Microsoft Excel, enter "Year" into cell
A1 and "Balance" into cell B1. Enter years 0 to 5 into cells A2 through A7. The balance for year 0 is
$1,000, so you would enter "1000" into cell B2. Next, enter "=B2*1.05" into cell B3. Then enter
"=B3*1.05" into cell B4 and continue to do this until you get to cell B7. In cell B7, the calculation is
"=B6*1.05". Finally, the calculated value in cell B7 - $1,276.28 - is the balance in your savings account
after five years. To find the compound interest value, subtract $1,000 from $1,276.28; this gives you a
value of $276.28

2. The second way to calculate compound interest is to use a fixed formula. The compound interest
formula is ((P*(1+i)^n) - P), where P is the principal, i is the annual interest rate, and n is the number of
periods. Using the same information above, enter "Principal value" into cell A1 and 1000 into cell B1.
Next, enter "Interest rate" into cell A2 and ".05" into cell B2. Enter "Compound periods" into cell A3
and "5" into cell B3. Now you can calculate the compound interest in cell B4 by entering
"=(B1*(1+B2)^B3)-B1", which gives you $276.28.

3. A third way to calculate compound interest is to create a macro function. First start the Visual Basic
Editor, which is located in the developer tab. Click the Insert menu, and click on Module. Then type
"Function Compound_Interest(P As Double, i As Double, n As Double) As Double" in the first line. On
the second line, hit the tab key and type in "Compound_Interest = (P*(1+i)^n) - P". On the third line of
the module, enter "End Function." You have created a function macro to calculate the compound
interest rate. Continuing from the same Excel worksheet above, enter "Compound interest" into cell
A6 and enter "=Compound_Interest(B1,B2,B3)". This gives you a value of $276.28, which is consistent
with the first two values.
Using Other Calculators

As mentioned above, a number of free compound interest calculators are offered online, and many handheld
calculators can carry out these tasks as well.

 The free compound interest calculator offered through Financial-Calculators.com is simple to operate
and offers to compound frequency choices from daily through annually. It includes an option to select
continuous compounding and also allows input of actual calendar start and end dates. After inputting
the necessary calculation data, the results show interest earned, future value, annual percentage yield
(APY), which is a measure that includes compounding, and daily interest.
 Investor.gov, a website operated by the U.S. Securities and Exchange Commission (SEC), offers a free
online compound interest calculator. The calculator is fairly simple, but it does allow inputs of monthly
additional deposits to the principal, which is helpful for calculating earnings where additional monthly
savings are being deposited.
 A free online interest calculator with a few more features is available at TheCalculatorSite.com. This
calculator allows calculations for different currencies, the ability to factor in monthly deposits or
withdrawals, and the option to have inflation-adjusted increases to monthly deposits or withdrawals
automatically calculated as well.

The Frequency of Compounding

Interest can be compounded on any given frequency schedule, from daily to annually. There are standard
compounding frequency schedules that are usually applied to financial instruments.

The commonly used compounding schedule for savings account at a bank is daily. For a CD, typical compounding
frequency schedules are daily, monthly or semi-annually; for money market accounts, it's often daily. For home
mortgage loans, home equity loans, personal business loans or credit card accounts, the most commonly applied
compounding schedule is monthly. There can also be variations in the time frame in which the accrued interest
is actually credited to the existing balance. Interest on an account may be compounded daily but only credited
monthly. It is only when the interest is actually credited, or added to the existing balance, that it begins to earn
additional interest in the account.

Some banks also offer something called continuously compounding interest, which adds interest to the principal
at every possible instant. For practical purposes, it doesn't accrue that much more than daily compounding
interest unless you're wanting to put money in and take it out the same day.

More frequent compounding of interest is beneficial to the investor or creditor. For a borrower, the opposite is
true.

Time Value of Money Consideration

Understanding the time value of money and the exponential growth created by compounding is essential for
investors looking to optimize their income and wealth allocation.

The formula for obtaining the future value (FV) and present value (PV) are as follows:
FV = PV (1 +i)n and PV = FV / (1 + i) n
For example, the future value of $10,000 compounded at 5% annually for three years:
= $10,000 (1 + 0.05)3
= $10,000 (1.157625)
= $11,576.25
The present value of $11,576.25 discounted at 5% for three years:
= $11,576.25 / (1 + 0.05)3
= $11,576.25 / 1.157625
= $10,000

The reciprocal of 1.157625, which equals 0.8638376, is the discount factor in this instance.

The "Rule of 72" Consideration

The so-called Rule of 72 calculates the approximate time over which an investment will double at a given rate of
return or interest “i,” and is given by (72 / i). It can only be used for annual compounding.

As an example, an investment that has a 6% annual rate of return will double in 12 years.
An investment with an 8% annual rate of return will thus double in nine years.

Compound Annual Growth Rate (CAGR)

The compound annual growth rate (CAGR) is used for most financial applications that require the calculation of a
single growth rate over a period of time.

Let's say your investment portfolio has grown from $10,000 to $16,000 over five years; what is the CAGR?
Essentially, this means that PV = -$10,000, FV = $16,000, nt = 5, so the variable “i” has to be calculated. Using a
financial calculator or Excel, it can be shown that i = 9.86%.

(Note that according to the cash-flow convention, your initial investment (PV) of $10,000 is shown with a
negative sign since it represents an outflow of funds. PV and FV must necessarily have opposite signs to solve for
“i” in the above equation).

CAGR Real-life Applications

The CAGR is extensively used to calculate returns over periods of time for stock, mutual funds, and investment
portfolios. The CAGR is also used to ascertain whether a mutual fund manager or portfolio manager has
exceeded the market’s rate of return over a period of time. If, for example, a market index has provided total
returns of 10% over a five-year period, but a fund manager has only generated annual returns of 9% over the
same period, the manager has underperformed the market.

The CAGR can also be used to calculate the expected growth rate of investment portfolios over long periods of
time, which is useful for such purposes as saving for retirement. Consider the following examples:

Example 1: A risk-averse investor is happy with a modest 3% annual rate of return on her portfolio. Her present
$100,000 portfolio would, therefore, grow to $180,611 after 20 years. In contrast, a risk-tolerant investor who
expects an annual return of 6% on her portfolio would see $100,000 grow to $320,714 after 20 years.

Example 2: The CAGR can be used to estimate how much needs to be stowed away to save for a specific
objective. A couple who would like to save $50,000 over 10 years towards a down payment on a condo would
need to save $4,165 per year if they assume an annual return (CAGR) of 4% on their savings. If they are prepared
to take a little extra risk and expect a CAGR of 5%, they would need to save $3,975 annually.
Example 3: The CAGR can also be used to demonstrate the virtues of investing earlier rather than later in life. If
the objective is to save $1 million by retirement at age 65, based on a CAGR of 6%, a 25-year old would need to
save $6,462 per year to attain this goal. A 40-year old, on the other hand, would need to save $18,227, or almost
three times that amount, to attain the same goal.

 CAGRs also crop up frequently in economic data. Here is an example: China’s per-capita GDP increased
from $193 in 1980 to $6,091 in 2012. What is the annual growth in per-capita GDP over this 32-year
period? The growth rate “i” in this case works out to be an impressive 11.4%.
Pros and Cons of Compounding

While the magic of compounding has led to the apocryphal story of Albert Einstein calling it the eighth wonder
of the world or man’s greatest invention, compounding can also work against consumers who have loans that
carry very high-interest rates, such as credit card debt. A credit card balance of $20,000 carried at an interest
rate of 20% compounded monthly would result in total compound interest of $4,388 over one year or about
$365 per month.

On the positive side, the magic of compounding can work to your advantage when it comes to your investments
and can be a potent factor in wealth creation. Exponential growth from compounding interest is also important
in mitigating wealth-eroding factors, like rises in the cost of living, inflation, and reduction of purchasing power.

Mutual funds offer one of the easiest ways for investors to reap the benefits of compound interest. Opting to
reinvest dividends derived from the mutual fund results in purchasing more shares of the fund. More compound
interest accumulates over time, and the cycle of purchasing more shares will continue to help the investment in
the fund grow in value.

Consider a mutual fund investment opened with an initial $5,000 and an annual addition of $2,400. With an
average of 12% annual return of 30 years, the future value of the fund is $798,500. The compound interest is the
difference between the cash contributed to investment and the actual future value of the investment. In this
case, by contributing $77,000, or a cumulative contribution of just $200 per month, over 30 years, compound
interest is $721,500 of the future balance. Of course, earnings from compound interest are taxable, unless the
money is in a tax-sheltered account; it's ordinarily taxed at the standard rate associated with the taxpayer's tax
bracket.

Compound Interest Investments

An investor who opts for a reinvestment plan within a brokerage account is essentially using the power of
compounding in whatever they invest. Investors can also experience compounding interest with the purchase of
a zero-coupon bond. Traditional bond issues provide investors with periodic interest payments based on the
original terms of the bond issue, and because these are paid out to the investor in the form of a check, interest
does not compound. Zero-coupon bonds do not send interest checks to investors; instead, this type of bond is
purchased at a discount to its original value and grows over time. Zero-coupon bond issuers use the power of
compounding to increase the value of the bond so it reaches its full price at maturity.

Compounding can also work for you when making loan repayments. Making half your mortgage payment twice
a month, for example, rather than making the full payment once a month, will end up cutting down your
amortization period and saving you a substantial amount of interest.
Compound Interest
We will start with a quote attributed to Albert Einstein:

Compound interest is the greatest mathematical discovery of all time

There is some controversy as to whether he really said that. In fact, people attribute him several quotes about
compounding such as saying it is the eighth wonder of the world or even saying it is the most powerful force in
the universe. Over the years, many quotes have been wrongly attributed to Einstein. I would really not be
surprised if he did not say anything like that. Regardless of who said what, compound interest is a powerful tool.

In fact, compound interest is very simple. It is interest over interest. Standard interest only gives interest over
the principal. However, with compound interest, the principal includes the previous interest. That means that
you get interests over an increasingly large principal capital. This may not sound like a big difference, but it is a
big difference. Compound interest will always return more than standard interest.

But this is not magic, it is simple math as we will see in the next section. And almost everything compounds
these days. Even though the results are great, I would hardly call that magic.

Calculating the future value

Now, we will have to do some math. Since interest is computed over the accumulated principal and not only the
basic principal, it is a bit more complicated to compute the future value of your money than with standard
interest where it is trivial.

First of all, it is necessary to know the interest (I) and the principal (P) of course. But you also need to know the
compounding period. That is the frequency of compounding, or when is the interest calculated. For most banks,
compounding is done on a daily basis. If you want to compute compounding for the stock market, you need to
take into account the average yearly returns as interest and a yearly period.

Once you have all these values, you can compute the Future Value (FV) of your money after n compounding
periods with this formula:

FV = P ( 1 + I ) ^ n

This will only work if the interest (I) is is in the same time unit as n. Generally, you have a yearly interest rate (r)
and a number of compounding periods per year (t):

FV = P ( 1 + r/n ) ^ nt

These formulas will give you the value of your money in the future.

Of course, you do not have to do the math yourself if you do not want. Indeed, there are many calculators out
there on the internet that will do the job just fine for you. For instance, the calculator on investor.gov is quite
good. It is operated by the U.S. Securities and Exchange Commission (SEC), which are interestingly also
regulating the stock market. The calculator from financial-calculators.com is also quite easy to use and has a bit
more options. And there are hundreds of other calculators on the internet if you are not satisfied with these
two.
A few examples
We can see the result with a few examples. First of all, let’s see what is the difference between standard interest
and compound interest. For instance, with a 10% annual interest and a 1000 principal:

Year Standard Compound

0 $1,000 $1,000
1 $1,100 $1,100
2 $1,200 $1,210
3 $1,300 $1,331
4 $1,400 $1,464
5 $1,500 $1,611
6 $1,600 $1,772
7 $1,700 $1,949
8 $1,800 $2,144
9 $1,900 $2,358
10 $2,000 $2,594

As you can see, compound interest quickly become much more interesting than standard interest. This shows
what some people call the magic of compounding in which small increments of the principal actually make a lot
of difference in the end. It takes 10 years to double the sum with standard interest while it only takes a bit more
than 7 years for compound interest.
We can also compare the compounding frequencies. For instance, with a 10% yearly interest rate, but
compounding at different periods:

Periods After 5 years After 10 years

1 $16,105 $25,937
2 $16,289 $26,533
3 $16,353 $26,743
4 $16,386 $26,851
6 $16,419 $26,960
12 $16,453 $27,070
365 $16,486 $27,179

As you can see, the more often the interest compounds, the better it gets. Compounding twice at 5% per year
instead of once at 10% can make a nice difference in the end. Of course, you can generally not choose the
compound perioding of any of your investments. But it is still interesting to now that!

Magic of compounding
The magic of compounding as many people call it happens over the long-term. For instance, 10’000 dollars with
10% annual interest will grow to 174’494 dollars after 30 years. If you are saving for the long-term, this is
incredible.
And it gets even more incredible when you consider contributions to the account during the years. For example,
if you add 200 dollars per month to the previous example, you will end up with 569’279 dollars after 30 years.
And you will only have contributed 82’000 dollars. That is almost a gain of 500’000 dollars over 30 years. This is
not bad, right?
Compound interest and its magic are highly related to starting to invest early. The earlier you start, the easier it
will get to have big returns with compounding. This is one of the reasons you should start to invest early.
The Rule of 72
You may have heard already of the Rule of 72. It is a simple approximation that lets you estimate when the
principal will have doubled its value based on the annual returns. The rule is fairly simple: divide 72 by the yearly
returns and it will give you the number of years to double your principal.

For instance, if you have 10% annual returns, it should double after 7.2 years. Of course, it is only an
approximation, the real number being 7.27 years. But it is a fairly good approximation. Here is the comparison
between the Rule of 72 and the Real answer, rounded, for some returns:
Return Rule of Real
72 We can observe that the approximation is really good for small numbers. But it
gets worse and worse as we have bigger returns. Some people prefer to use
2% 36 35.00
the rule of 69.3 that is sometimes a bit more precise for small numbers too.
3% 24 23.45
But it is a bit less convenient!
5% 14.4 14.21
10% 7.2 7.27
However, using this rule for investment returns is perfectly fine since we
20% 3.6 3.80
should not expect more than 10% of annual returns. It is much easier than
25% 2.88 3.11 computing log(2)/log(1+return) in the head, right?
50% 1.44 1.71
75% 0.96 1.24
100% 0.72 1.00
Compounding in the stock market

Most people talk about compounding for stock market returns. However, the stock market does not really
compound. A compound interest keeps the same interest all the time. The stock market is much more volatile.
And there will be some days and months where your portfolio is down. And that is totally fine.

The major difference comes with negative years. If your portfolio is down 10% a year and up 10% the next year,
it is still down. This is because 10% of 90% of the original portfolio is only 9% and not 10%. This makes it a bit
difficult to really talk about compounding in the stock market.

On the long-term, effects of the stock market can be described as compound interest. Indeed, if you use a
realistic yearly rate of return over a long-term, you can use compound interest and the rule of 72 to describe
your stock market returns. You just need to be aware that this is not exactly the same.

Compound interest is not always good

Sometimes compound interest can also play in your disfavor! Indeed, your bank account and stock market
returns are not the only things that can compound. Your credit card debts compound in the same way.

Credit card balances have very high interest, often more than 10%. And it compounds daily. We saw before that
the more often interest compounds, the stronger its effect gets. This is very true for credit card debt. This is how
credit card companies make a lot of their money. For instance, if you have a credit card debt of 5000 dollars with
12% annual interest rate, it will become 9’110 dollars after 5 years if you do not pay it!

The magic of compounding can also play against you. You should never carry compounding debt with high an
annual interest rate!
Another example is that currency inflation is also compounding. That means an inflation rate of 3% will also
compound year after year. After 10 years, it will not be 30%, but 34.4%. This makes inflation even harder to fight
since it compounds!

Conclusion
Compound interest is a really powerful tool that will you achieve Financial Independence. It is not magic, it is
just math. But there is no denying that its effects are very powerful. It will make your money grow faster than
with standard interest. And it is important to know how this works in practice. Because of the way it is working,
it is important to start to invest early!

If something is compounding, you can use the Rule of 72 to estimate when the value will have doubled. On the
long-term, we can apply compound interest to the stock market even though it does not compound in the same
way a bank account would compound. Finally, even though compound interest is great, it can also play against
you! Your credit card debt will also compound!

Simple Interest
The topic of consideration in this article is Simple Interest. But before we begin with “simple interest”, let us
define the term interest.

Interest is actually one of the most fundamental business terms, and without it, the financial trading of the
world would come to standstill. Interest is defined as the “time value of money”. What exactly does this mean?
Well, look at this way: with time, the value of money changes. Suppose you Rs. 100 in the year 2000. Would it
still be Rs. 100 or would the amount have grown? If you had deposited the money in a saving bank account, say
with an annual rate of interest 4%, that money would have definitely grown by now. Can you calculate the
amount you would have with you in 2013? Well, in case you can’t right now, go through these concept notes
and you would know the answer.

The concept of simple and compound interest is especially applicable to the world of banking and economics.
Whenever we borrow a certain sum of money (known as the principal), we pay back the original amount
accompanied with a certain amount of interest on that amount. In a way, those are the charges of borrowing
that sum of money. Simple interest is one method of determining the amount due at the end of a loan duration.
Another method of interest application is compound interest, but we study about it in the next article.Simple
Interest Tooltip 1: The Definitions

Principal (P): The original sum of money loaned/deposited. Also known as capital.
Interest (I): The amount of money that you pay to borrow money or the amount of money that you earn on a
deposit.
Time (T): The duration for which the money is borrowed.
Rate of Interest (R): The percent of interest that you pay for money borrowed, or earn for money deposited.

Simple Interest Tooltip 2: The Formula

Simple Interest (SI) = (P x R x T)/100

Where:
P: Principal (original amount)
R: Rate of Interest (in %)
T: Time period (yearly, half-yearly etc.)
Amount Due at the end of the time period, A = P (original amount) + SI
A = P + { (P x R x T)/100 }
If you have a close look, Simple Interest is nothing else but an application of the concept of percentages.

Simple Interest Tooltip 3: Basic Problems to explain the concept

Basic Problem 1: What is the SI on Rs. 7500/- at the rate of 12% per annum for 8 years?
Using the Basic Formula:
Simple Interest (SI) = (P x R x T)/100
P – Principal amount, T- Number of years, R – Rate of Interest
Given P = 7500, N = 8 Years, R = 12%
S.I = (7500X12X8)/100
S.I = 7200

Basic Problem 2: A man borrowed rs.15000/- at the rate of 24% SI and to clear the debt after 6 years, much he
has to return:
Using the Basic Formula:
Simple Interest (SI) = (P x R x T)/100
P – Principal amount, T- Number of years, R – Rate of Interest
Given P = 15000, T = 6 Years, R = 8%
S.I = PNR / 100
S.I =(15000X24X6)/100
= 21600
Therefore, total interest = 21600
Total repayment = S.I + Principal amount
Answer = 21600 + 15000 = Rs 36600

Basic Problem 3: A man borrowed Rs.12000 at the rate of 10% SI, and lent the same sum to another person at
the rate of 15% what will be the gain after 5 years?
Using the Basic Formula:
Simple Interest (SI) = (P x R x T)/100
P – Principal amount, T- Number of years, R – Rate of Interest
A man borrowed at 15%
He lent the same sum to another person at 15%
Therefore his gain is actually equal to the different in the interest rate (per year) 15 – 10 =5% for 1 year
Thus, to calculate his gain, we use this difference as the rate of interest.
Given T = 5 years and P = Rs. 12000
First we are calculating for Rs. 100
Amount Gained = (12000x5x5)/100 = Rs. 3000
Therefore his gain = Rs. 3000/-
Simple Interest
What is Simple Interest
Simple interest is the method of calculating the interest amount for some principal amount of money. Simple
interest formula in maths helps you to find the interest amount if the principal amount, rate of interest and time
periods are given. The S.I formula used for same is = (P × R × T) / 100. Another type of interest is compound
interest.
The major difference between simple and compound interest is that simple interest is based on the principal
amount of a deposit or a loan whereas the compound interest is based on the principal amount and interest that
accumulates in every period of time. Let’s see one simple example to understand the concept of simple interest.

Simple Interest Example

Have you ever borrowed money from your siblings when your pocket money got exhausted? Or lent him
maybe? What happens when you borrow money? You use that money for the purpose you had borrowed it in
the first place. After that, you return the money whenever you get the next month’s pocket money from your
parents. This is how borrowing and lending work at home. But in the real world, money is not free to borrow.
You often have to borrow money from banks in the form of a loan. During payback, apart from the loan amount,
you pay some more money that depends on the loan amount as well as the time for which you borrow. This is
called simple interest. This term finds extensive usage in banking.

How to Calculate Simple Interest

Simple interest is calculating by using the formula:

SI = (P × R × T)
Calculate simple interest by plugging your figures into the formula where SI represents simple interest, P
represents the principal, R represents the interest rate in decimal form and T represents the term in years or
months.
You can find your simple daily interest by dividing your annual interest rate by 365 and multiplying it by the loan
balance. This method is used by financial companies to compound interest daily when you have a loan due on a
specific day of the month. Its function is to charge you interest by the day for the amount of days from your last
payment to your present payment. If you make an early payment, the interest is calculated only for the days
since your last payment. Your loan balance is reduced on the day you make your payment rather than on the
due date of the payment.
Examples of Calculating Simple Interest and Simple Daily Interest
For an example of simple interest, if your principal is $1,000, your interest rate is 10 percent and your term is 1
year, your formula would be:
SI = (1,000 × .10 × 1). The simple interest in this case is $100 per year.
From the above example, your simple daily interest would be:
$100 ÷ 365 = 0.2740 (rounded off)
Other Considerations
To arrive at the rate of interest per year in decimal form, use this formula:
r = R ÷ 100
Where R is the rate of interest per year as a whole number, such as 10 percent.
To arrive at the rate of interest per year as a percent, multiply the rate of interest in decimal form times 100
using this formula:R = r × 100
Simple interest differs greatly from compound interest. Compound interest is usually the choice of calculations
for lenders, such as mortgage companies and financial institutions. In essence, you borrow money from an
organization and you pay interest on top of the interest on the loan.
 BAAO NATIONAL HIGH SCHOOL
BAAO CAMARINESUR

Research
In
Math

SUBMITTED BY :
ANGEL RENZIE MESOGA

SUBMITTED TO:
JOEL BACSAIN
 BAAO NATIONAL HIGH SCHOOL
BAAO CAMARINESUR

Research
In
Math

SUBMITTED BY :
IAN OLIVER LOPEZ

SUBMITTED TO:
JOEL BACSAIN