Compound Interest

What is Compound Interest?

Interest is the fee paid by a borrower for the use of a lenders money. Compound interest is interest calculated on the balance of the original loan amount and the accrued interest. Interest is charged on interest.

Compound Interest Formula

The formula for compounding interest on an annual basis is

Compound interest = Loan x (1 + Annual interest rate) ^ number of years – Loan

For further information on compounding interest see the Wikipedia definition.

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Last modified June 24th, 2013 by Team

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