Compound Interest Formula for Different Variables The compounded interest will be computed through the first deposited amount. After this process, it will be added to the entire cash amount. Then the interest will be compounded again for the second time and added again to the total amount of cash in the account. This cycle is done through the compound interest formula. It will repeat over and over until the savings period or loan periods end. What will the compound interest formula looked like if i deposited the amount of $1,000 and the interest if 10% every year? 1,000 + (1,000 * 10%) = ? (1,000 * 1) + (1,000 * (10/100)) = ? (1,000 * 1) + (1,000 * .10) = ? 1,000 * (1 + .10) = ? 1,000 * 1.10 = 1,100 as the outcome of the compound interest formula for the first year. In conclusion, the outcome of the compound interest formula for the first year is just like multiplying the first deposited amount to 1.10 which is the outcome of the interest multiplied by the first deposited amount itself. What is an easy way to compute or solve for the sum amount of cash for the fifth year? The long method of computing for the sum amount of cash for the fifth year. 1,000 * 1.10 * 1.10 * 1.10 * 1.10 * 1.10 = 1,610.51 The exponent method of computing for the sum amount of cash for the fifth year. 1,000 * 1.105 = 1,610.51 Here is the compound interest formula we use in general using variables and legends. CV * (1 + i ) n = O CV is the variable for the current value. i is the variable for the rate of interest. n is the variable is the number of times the interest is compounded O is the variable for the outcome of the compound interest formula. How About If We Would Like to Find Out the Answer to Other Variables in the Compound Interest Formula? Here is the Compound Interest Formula for the Current Value. CV * (1 * i) n = O (1 * i) n = (1 * i) n CV = O (1 * i) n Here is the Compound Interest Formula for the Rate of Interest. CV * (1 + i) n = O (1 + i) n = O/CV 1/n (1 + i) = (O/CV) 1/n i = (O/CV) –1 Here is the Compound Interest Formula for the Number of Times the Interest is Compounded. CV * (1 + i) n = O (1 + i) n = O/CV ln (1 + i) * n = ln (O/CV) n = ln (O/CV) ln (1 + i) For this formula, we used a logarithm function ln() to be able to come up with the correct answer. Knowing the different compound interest formula for every variable in it will give you an advantage in computing if you have a missing variable. Through the given formulas, it will now be stress-free to compute and memorize each formula. Use them in different situations to learn new thing about compounding of interest. It is also an advantage especially if you are enrolled in a loan or if you want to invest in a savings account. More of compound interest formula and compound interest calculator, visit William Ava’s Blog Site click here.
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