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Formula of calculating compound and simple interest |
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Answer» Explanation: For EXAMPLE, assume the principal is $100,000, the interest rate is 11 percent and the term is 2 YEARS. The simple interest formula is I = P x R x T. Compute compound interest using the FOLLOWING formula: A = P(1 + r/n) ^ nt. ... DIVIDE the interest rate by the number of compounding periods per year: 0.05/4 = 0.0125. |
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