Compound And Simple Interest Formulas Math

So in the short term it does a little bit better than simple interest.

Compound and simple interest formulas math. Use the following simple interest formula. By the end of this graph notice that the compound interest payment the compound interest total is over 1 000 more. Sally invests 1 000 at 12 simple interest for three years. The effect of time.

In most cases interest is calculated on a yearly basis but the terms may vary among financial institutions. Compound interest principal 1 rate time principal. When interest is compounded the principal amount grows faster than it would under simple interest. But then the longer we go the more it diverges and it does much much better than simple interest does.

Unlike simple interest which only accrues on the principal compound interest accrues on both the principal and interest combined. Kyle bought a 2000 government bond that yields 6 in simple interest each year. Rate of interest must be same in simple interest and compound interest. The simple interest for 2 years is rs.

Simple interest 4000 7 100 2. I p r t where p is the principal or money deposited r is the rate of interest t is time we get. Compound interest formula if an initial principal p is invested at an interest rate r compounded m times per year then the amount in the account after n periods is a n p 1 i n where i r m is the interest earned each year. Simple interest 560.

The principal in simple interest and compound interest must be same. So compound interest 4000 1 7 100 2 4000. Simple interest principle rate time ptr 100.