Compound Interest Problems: Formulas To Get
Compound interest problems, as we all know, is solved using the compound interest formula. It
is best that you practice it over and over. In return, it will make taking an exam on compound
interest easier. In real life, it would be very advantageous if you are preparing to get a loan or
investing in a savings account. The compound interest problems are not that hard to solve if
you know the right formulas. There will be a time that not only is the compound interest solved
for in compound interest problems. There will be times that other elements in a compound
interest are needed to be solved. There are even times where you need different types of
compound interest formulas for certain compound interest problems.
In this article, the different formulas in solving compound interest problems are given. The
compound interest formulas are mostly derived from the standard formula used in solving the
future value of a monetary situation wherein the compound interest concept is used.
Here, Are The Different Compound Interest Formulas Used In Solving Compound
Here, is the compound interest formula that is derived to make it possible for other elements in
compound interest problems to be solved.
It is made to solve for the outcome of a compound interest investment or a compound interest
loan with the compound interest concept.
FV = PV(1 + i)n
FV: is the future value is the amount being solved for. It is the outcome of an investment or
PV: is the present value. It is also known as the current cash amount of an inves tment.
i: is the rate of interest. It is usually given in its years form.
n: is the periods of compounding interest in a year.
Here, is the formula used for solving the present value or the principal amount in a compound interest
problems in investment or debt.
PV = FV ÷(1 + i)n
Here, is the formula used for solving the rate of interest in years form in compound interest problems.
i = (FV / PV)1/n-1
Here, is the formula used for solving the number of time the interest gets compounded.
n = log(FV) – log(PV) ÷ log(1 – i)
Here, is the standard compound interest formula used in solving for the final amount of compound
A = P(1 + r/n)nt
A: is the total outcome of either a loan or an investment with the compound interest concept.
P: is the principal amount. It is also known as the principal amount or first amount deposited in
an investment. For loans, it is known as the first installment amount which is usually the biggest
r: is the rate of interest in a yearly manner. It is usually in decimal form when you use it with the
formula. However in examinations, it is usually given in its percentage form.
n: is the times the interest gets compounded. There are different periods. Such periods are the
following: yearly which is equal to one, bi-annual which is equal to two, quarterly which is equal
to 4, and so on and so forth.
t is the time periods of the whole loan or investment or the time period to be so lved that is
given in compound interest problems.
Here, is the formula used in solving for the periodic compound interest problems.
A(t) = A0(1 + r/n)nt
A(t): is the Amount function
A0: is the Coefficient
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