Shikhakaushal

Compound Interest Definition Compound interest is the interest calculated on the principal and the interest accumulated over the previous period. It is different from the simple interest where interest is not added to the principal while calculating the interest during the next period. Compound interest finds its usage in most of the transactions in the banking and finance sectors and also in other areas as well. Some of its applications are: Increase or decrease in population. The growth of bacteria. Rise or depreciation in the value of an item. Compound Interest Formula The compound interest formula is given below: Compound Interest = Amount – Principal Where the  amount  is given by: Where, A= amount P= principal R= rate of interest n= number of times interest is compounded per year It is to be noted that the above formula is the general formula for the number of times the principal is compounded in an year. If the amount is compounded annually, the amount is given as-