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Learn Financial Freedom Step by Step

We know that compound interest is the interest on interest which generate from principal. Its Simple formula is

Compound Interest = Principal ( 1+rate of interest/100)^time - Principal

Now on this basis, we give its examples

Examples

Example No. 1

Suppose, you deposit money in the bank for 5 years with 7% interest which will be compounded annually. You invested 60000 what will be the total compound interest at the end of maturity.

Compound Interest = 60000 ( 1+ 7/100)^5- 60000= Rs. 24153.103842

If we divide 72 with 7, it is 10.28 means within 10.28 years, our principal will double with compound interest.

Example No. 2

Suppose, you deposit money in the bank for 5 years with 7% interest which will be compounded 6 month. You deposited Rs. 60000 what will be the total compound interest at the end of maturity.

The formula will be

Compound Interest = P[1 + (r/200)^2t] – P

= 60000[1+7/200)^2x5 ] - 60000 = 84635.9256373 -60000 = 24635.9256373

Example No. 3

Suppose, you deposit money in the bank for 5 years with 7% interest which will be compounded 4 month

(Quarterly). You deposited Rs. 60000 what will be the total compound interest at the end of maturity.

The formula will be

Compound Interest = P[1 + (r/400)^2t] – P

= 60000[1+7/400)^4x5 ] - 60000 =

Example No. 4

Suppose, you deposit money in the bank for 5 years with 7% interest which will be compounded montly. You deposited Rs. 60000 what will be the total compound interest at the end of maturity.

The formula will be

Compound Interest = P[1 + (r/1200)^12t] – P

= 60000[1+7/1200)^12x5 ] - 60000 =

Example No. 5

Suppose, you deposit money in the bank for 5 years with 7% interest which will be compounded daily. You deposited Rs. 60000 what will be the total compound interest at the end of maturity.

The formula will be

Compound Interest = P[1 + (r/36500)^365t] – P

= 60000[1+7/36500)^365x5 ] - 60000 =

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