Docstoc

Compound Interest Formula With Deposits: Difference Between Monthly And Yearly Compounding

Document Sample
Compound Interest Formula With Deposits: Difference Between Monthly And Yearly Compounding Powered By Docstoc
					    Compound Interest Formula With Deposits:
     Difference Between Monthly And Yearly
                  Compounding
Today, there are all sorts of compound interest formula. They are mostly used in finance or
mathematical subjects in schools. Some are used in loans and investments for the real life. The
compound interest formula with deposits is one of the formulas that are widely used. The
compound interest formula with deposits is more commonly and of best use in investments
such as savings.

In an investment of a savings account, one can choose from depositing a large amount and
letting it grow on its own; or making an initial deposit, then depositing every month or every
year. This is where the compound interest formula with deposits could help out a lot. If the
investor is knowledgeable with the compound interest formula with deposits, he or she will
know the approximate outcome of the investment. This is done through computing the total
amount for a certain amount of time, principal amount, rate of interest, and number of
compounding.



                           If you are still confused with how the system works then here, is the
                           answer: compound interest. The compound interest works by gaining
                           or profiting interest on interest. This just means the income or profit
                           will be doubled then doubled again until the given time ends.



How Does The Compound Interest Formula With Deposits Look Like:

P = C (1 + r/n) nt

Here, is the meaning of the compound interest formula with deposits elements:

       P represents the future amount of the investment or loan. This element is the answer we get
        after finishing computing or calculating.
       C represents the initially deposited amount. It is also known as the principal amount of an
        investment. For loans, it is known as the first installment.
       r represents the annual rate of interest. In terms of computations, it should be in decimal form.
        Therefore, if it is given in percent form, it should be divided to 100 first before it is ready for
        substituting in the compound interest formula with deposits.
       n represents the count/s of how many the interest gets compounded for a year.
       t represents the amount of years of an investment or debt.
This compound interest formula with deposits is used mainly for loans and investments which
get deposited or paid every month. It is also used for those which have more than one-time
compounding of interest. On the other hand, if an investment only gets deposited every year
and interest gets compounded one time a year only, then that is a different thing or formula. It
comes with an easier formula.

The compound interest formula with deposits for yearly deposits and compounding only:

P = C (1 + r) t

The compound interest formula with deposits ends up looking like this because the number of
compounding or the element ‘n’ in the formula will just be equal to 1.

More of compound interest formula with deposits and compound interest formula, visit
William Ava’s Blog Site click here.

				
DOCUMENT INFO
Description: Compound Interest Formula With Deposits: Difference Between Monthly And Yearly Compounding. Today, there are all sorts of compound interest formula.