Compound interest is paid on the original principal and accumulated part of interest.Formula for calculating compound interest :P = A(1 +r/n)^nt, whereP = the principalA = the amount depositedr = the rate (expressed as fraction, e.g. 6 per cent = 0.06)n = number of times per year that interest is compoundedt = number of years investedFrequently compounding of Interest. If the interest is compounded :Annually = P (1 + r)Quarterly = P (1 + r/4)^4Monthly = P (1 + r/12)^12Example :The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in years) is: Amount = Rs. (30000 + 4347) = Rs. 34347.Let the time be n years. Then30000(1+7/100)^n = 34347(107/100)^n = 34347/30000(107/100)^n = 11449/10000(107/100)^n = (107/100)^2n = 2 years.The Rule of 72: Allows you to determine the number of years before your money doubles whether in debt or investment. Divide the number 72 by the percentage rate.
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