Simple Interest Formulas

The Compound Interest Equation P = C (1 + r/n) nt

Where:
P = future value
C = initial deposit
r = interest rate (expressed as a fraction: eg. 0.06)
n = # of times per year interest is compounded
t = number of years invested

Simplified Compound Interest Equation P = C (1 + r) t

When interest is only compounded once per year (n=1), the equation simplifies to:

rt
Continuous Compound Interest P=Ce
When interest is compounded continually (i.e. n --> ), the compound interest equation takes the form:

Demonstration of Various Compounding

The following table shows the final principal (P), after t = 1 year, of an account initially with C = $10000, at
6% interest rate, with the given compounding (n).

(n) Number of Times (P) Final Principal

Compounded at the end of one year
1 (yearly) $ 10600.00
2 (semiannually) $ 10609.00
4 (quarterly) $ 10613.64
12 (monthly) $ 10616.78
52 (weekly) $ 10618.00
365 (daily) $ 10618.31
Continuous $ 10618.37

Loan Balance
Situation: A person initially borrows an amount A and in return agrees to make n repayments per year,
each of an amount P. While the person is repaying the loan, interest is accumulating at an annual
percentage rate of r, and this interest is compounded n times a year (along with each payment). Therefore,
the person must continue paying these installments of amount P until the original amount and any
accumulated interest is repaid. This equation gives the amount B that the person still needs to repay after t
years.
nt
⎛ r⎞
⎜ 1+ ⎟ − 1
⎛ r⎞
nt
⎝ n⎠
B = A⎜ 1 + ⎟ −P
⎝ n⎠ ⎛ r⎞
⎜ 1+ ⎟ − 1
⎝ n⎠
Where:
B = balance after t years
A = amount borrowed
n = number of payments per year
P = amount paid per payment
r = annual percentage rate (APR)

Saved C: Math - Simple Interest Formulas

http://www.math.com