Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. Compound interest is standard in finance and economics.

Formula

Let Principal = P, Rate = R% per annum, Time = n years.

When interest is compound Annually:

Amount = P(1+

R/100

)^{n}

When interest is compounded Half-yearly:

Amount = P[1+

(R/2)/100

]^{2n}

When interest is compounded Quarterly:

Amount = P[1+

(R/4)/100

]^{4n}

When interest is compounded Annually but time is in fraction, say 3^{
2
/
5
}

years.

Amount = P[1+

R/100

]^{3}
x (1+

^{
2
/
5
}R/100

)

When Rates are different for different years, say R_{1}%, R_{2}%, R_{3}% for 1^{st}, 2^{nd} and 3^{rd} year respectively.

Then Amount = P(1+

R_{1}/100

)
(1+

R_{2}/100

)
(1 +

R_{3}/100

)

Present worth of Rs. x due n years hence is given by: