CLASS 8 MATH CHP 13 COMPOUND INTEREST PART 2
### Article: Understanding Compound Interest: A Step-by-Step Guide
Compound interest is a fundamental concept in finance that has the potential to grow your money over time. Unlike simple interest, which is calculated only on the initial principal amount, compound interest is calculated on the principal and the accumulated interest from previous periods. This article will guide you through understanding how to calculate compound interest, using the provided transcription as a foundation.
---
#### What Is Compound Interest?
Compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods. It is often referred to as "interest on interest." The formula for calculating compound interest is:
**A = P × (1 + r/n)^(nt)**
Where:
- **A** = the amount of money accumulated after n years, including interest.
- **P** = the principal amount (the initial amount of money).
- **r** = the annual interest rate (decimal).
- **n** = the number of times that interest is compounded per year.
- **t** = the time the money is invested for in years.
---
#### Step-by-Step Calculation of Compound Interest
1. **Understanding the Formula**
The formula for compound interest can be broken down into simpler steps. For example, if you have a principal amount of ₹2000, an annual interest rate of 5%, and the interest is compounded annually over 3 years, the calculation would proceed as follows:
- **Year 1:**
Interest = ₹2000 × 5% = ₹100
Amount at the end of Year 1 = Principal + Interest = ₹2000 + ₹100 = ₹2100
- **Year 2:**
Interest = ₹2100 × 5% = ₹105
Amount at the end of Year 2 = ₹2100 + ₹105 = ₹2205
- **Year 3:**
Interest = ₹2205 × 5% = ₹110.25
Amount at the end of Year 3 = ₹2205 + ₹110.25 = ₹2315.25
Therefore, the total amount after 3 years is ₹2315.25, and the compound interest earned is ₹315.25 (₹2315.25 - ₹2000).
---
#### Direct Calculation Using the Formula
Instead of calculating year by year, you can use the compound interest formula directly:
**A = P × (1 + r)^t**
Where:
- **P** = Principal amount (₹2000)
- **r** = Annual interest rate (5% or 0.05)
- **t** = Time in years (3)
Plugging in the values:
**A = 2000 × (1 + 0.05)^3**
**A = 2000 × (1.157625)**
**A = 2315.25**
Thus, the amount after 3 years is ₹2315.25, as calculated earlier.
---
#### Benefits of Compound Interest
Compound interest can work wonders for your finances if used wisely. Here are some benefits:
- **Wealth Growth:** The power of compounding allows your money to grow exponentially over time. Even small amounts can grow significantly if given enough time.
- **Savings and Investments:** Banks, savings accounts, and investment vehicles like stocks often use compound interest, making them more attractive for long-term financial goals.
- **Early Start Advantage:** Starting to save or invest early allows your money to benefit from compounding over a longer period, leading to higher returns.
---
#### Common Applications of Compound Interest
1. **Banking and Finance:** Banks offer compound interest on savings accounts, fixed deposits, and other investment products.
2. **Investments:** Stock markets, mutual funds, and other financial instruments use compound interest principles to generate returns.
3. **Loans:** Some loans, such as credit card debt, use compound interest, which can increase the total amount owed if payments are not made on time.
---
#### Conclusion
Understanding compound interest is essential for managing your finances effectively. By using the formula and breaking down the calculations step by step, you can determine how much money you will have in the future or how much you need to invest today to achieve your financial goals. Remember, the earlier you start, the more time your money has to grow through the power of compounding!
---
This article provides a clear explanation of compound interest, its formula, and practical applications, making it easier for anyone to grasp this important financial concept.
"WEBVTTKind: captionsLanguage: enThat Now We Will Discuss How To Find CompoundThat Now We Will Discuss How To Find CompoundThat Now We Will Discuss How To Find CompoundInterest In Judging From Last 9 This FormInterest In Judging From Last 9 This FormInterest In Judging From Last 9 This FormLast Date Which Can Be Applied DirectlyLast Date Which Can Be Applied DirectlyLast Date Which Can Be Applied DirectlyAnd Compound Interest And SoftAnd Compound Interest And SoftAnd Compound Interest And SoftIs The CompetitionIs The CompetitionIs The CompetitionTurn Of Compound Interest And Amount OneTurn Of Compound Interest And Amount OneTurn Of Compound Interest And Amount OneInterested Can Adversely Now How ToInterested Can Adversely Now How ToInterested Can Adversely Now How ToCalculate Interest One InterestedCalculate Interest One InterestedCalculate Interest One InterestedCompounded Annually Chicken meansCompounded Annually Chicken meansCompounded Annually Chicken meanswhat we did in the previous questions that like onewhat we did in the previous questions that like onewhat we did in the previous questions that like oneby one we used to calculate the interest of first year,by one we used to calculate the interest of first year,by one we used to calculate the interest of first year,number one principal wasnumber one principal wasnumber one principal wascalculated and then we got the interest of second year andcalculated and then we got the interest of second year andcalculated and then we got the interest of second year andthen the interest of second year and updatedthen the interest of second year and updatedthen the interest of second year and updatedamount ok so in this way we find the amount. Theamount ok so in this way we find the amount. Theamount ok so in this way we find the amount. Thecompound interest and oblige but now I havecompound interest and oblige but now I havecompound interest and oblige but now I havedirectly from love okay by usingdirectly from love okay by usingdirectly from love okay by usingformula one can find directly okay so whatformula one can find directly okay so whatformula one can find directly okay so whatis the formula two point compoundis the formula two point compoundis the formula two point compoundinterest and might be interestedinterest and might be interestedinterest and might be interestedcompounded annuallycompounded annuallycompounded annuallyand every wound lies in OPD notesand every wound lies in OPD notesand every wound lies in OPD notesprincipal today 5 rate off Interest Perprincipal today 5 rate off Interest Perprincipal today 5 rate off Interest PerYears And Not A Number Of Years Back EYears And Not A Number Of Years Back EYears And Not A Number Of Years Back ERemembered And Not A Number Of YearsRemembered And Not A Number Of YearsRemembered And Not A Number Of YearsYes Know How Can They Find Amount TheYes Know How Can They Find Amount TheYes Know How Can They Find Amount TheFormula To Find Us On This TheFormula To Find Us On This TheFormula To Find Us On This ThePrinciple One Plus Rate Upon Her HusbandPrinciple One Plus Rate Upon Her HusbandPrinciple One Plus Rate Upon Her HusbandAnd Women Entrests AttractAnd Women Entrests AttractAnd Women Entrests AttractPrinciples From AmountPrinciples From AmountPrinciples From AmountThat Kepler Or You can if you want to pointThat Kepler Or You can if you want to pointThat Kepler Or You can if you want to pointcompound interest you can be appliedcompound interest you can be appliedcompound interest you can be applieddirectly the formula put the value ofdirectly the formula put the value ofdirectly the formula put the value ofmount hair vs oneplus are upon hey zafarmount hair vs oneplus are upon hey zafarmount hair vs oneplus are upon hey zafarand - learn well oneplus after pondand - learn well oneplus after pondand - learn well oneplus after ponddestroyed and minus one so you candestroyed and minus one so you candestroyed and minus one so you cancontact them love them pandey and you can Docontact them love them pandey and you can Docontact them love them pandey and you can DoSubscribe Latest SubscribeSubscribe Latest SubscribeSubscribe Latest SubscribeCompound Interest Sure 2% CompoundedCompound Interest Sure 2% CompoundedCompound Interest Sure 2% CompoundedAnnually Software Computer PrincipleAnnually Software Computer PrincipleAnnually Software Computer PrincipleShyam Times Hui HaiShyam Times Hui HaiShyam Times Hui HaiGhar Ke Number Of Teachers And Waste On This ChannelGhar Ke Number Of Teachers And Waste On This ChannelGhar Ke Number Of Teachers And Waste On This ChannelAnd Compounded Annually Cheeku Now We HaveAnd Compounded Annually Cheeku Now We HaveAnd Compounded Annually Cheeku Now We HaveAnimal Fight Karne Chikitsa To Hui And ShouldAnimal Fight Karne Chikitsa To Hui And ShouldAnimal Fight Karne Chikitsa To Hui And ShouldI Discuss Life In Mountain MountainI Discuss Life In Mountain MountainI Discuss Life In Mountain MountainPrinciple one plus rate principle shyamPrinciple one plus rate principle shyamPrinciple one plus rate principle shyam1.21.21.2aaj tak pound inch and mystery solved 2000aaj tak pound inch and mystery solved 2000aaj tak pound inch and mystery solved 2000main one plus one upon is power to three tomain one plus one upon is power to three tomain one plus one upon is power to three to1000 sim1000 sim1000 simki 11.2 news power to do you open theki 11.2 news power to do you open theki 11.2 news power to do you open theromantic line by 11.2 11.20 cancer with 0romantic line by 11.2 11.20 cancer with 0romantic line by 11.2 11.20 cancer with 00hai 100 us aso navmi calculate Compoundhai 100 us aso navmi calculate Compoundhai 100 us aso navmi calculate CompoundInterest S You Know The Formula OfInterest S You Know The Formula OfInterest S You Know The Formula OfCompounding Interest Is Amount -Compounding Interest Is Amount -Compounding Interest Is Amount -Principal AmountPrincipal AmountPrincipal AmountIs 100 - Principal Is Through StrictIs 100 - Principal Is Through StrictIs 100 - Principal Is Through StrictSuccessful Services That Is 210Successful Services That Is 210Successful Services That Is 210Because Of This Ishara Answer Got A Plate In IndustryBecause Of This Ishara Answer Got A Plate In IndustryBecause Of This Ishara Answer Got A Plate In IndustryCompound Interest Gangster Act ToCompound Interest Gangster Act ToCompound Interest Gangster Act ToMaximum How To Calculate CompoundMaximum How To Calculate CompoundMaximum How To Calculate CompoundInterest One Interested Compound Half WearInterest One Interested Compound Half WearInterest One Interested Compound Half WearLook So now what is the meaning of this idiom?Look So now what is the meaning of this idiom?Look So now what is the meaning of this idiom?Now how to find the amount? TheNow how to find the amount? TheNow how to find the amount? Theamount is equal to the principleamount is equal to the principleamount is equal to the principlethat OnePlus are upon to multiply bythat OnePlus are upon to multiply bythat OnePlus are upon to multiply bythem a little virtual chic. So when we come to thethem a little virtual chic. So when we come to thethem a little virtual chic. So when we come to thematter of Ali,this is What foam did you put it told that in youthis is What foam did you put it told that in youthis is What foam did you put it told that in youI am in your show and how to find the compoundI am in your show and how to find the compoundI am in your show and how to find the compoundinterest simply this is now tractorinterest simply this is now tractorinterest simply this is now tractorprinciples from amountprinciples from amountprinciples from amountwere latest discuss example point compoundwere latest discuss example point compoundwere latest discuss example point compoundinterest on form z date of one percentinterest on form z date of one percentinterest on form z date of one percentand power deficitand power deficitand power deficit200 hui how to Find the compound interest200 hui how to Find the compound interest200 hui how to Find the compound interestok ahirwal compound half will also give meok ahirwal compound half will also give meok ahirwal compound half will also give methe formula of fear loop slow amount isthe formula of fear loop slow amount isthe formula of fear loop slow amount isequal to zero principle is t20equal to zero principle is t20equal to zero principle is t20i one plus rate is eight upon two multiplyi one plus rate is eight upon two multiplyi one plus rate is eight upon two multiplyrefrain time * multiply f22 this 5000refrain time * multiply f22 this 5000refrain time * multiply f22 this 5000pause 812 plus rapo 202 teacher 225 499pause 812 plus rapo 202 teacher 225 499pause 812 plus rapo 202 teacher 225 49950025 201025 201025 2010The Most Age SIM 26.1 5 Responses toThe Most Age SIM 26.1 5 Responses toThe Most Age SIM 26.1 5 Responses toInnovateInnovateInnovatePunished by 1000 26.1 More 26.1 500 ThePunished by 1000 26.1 More 26.1 500 ThePunished by 1000 26.1 More 26.1 500 TheBenefits of Twenty Five TimesBenefits of Twenty Five TimesBenefits of Twenty Five TimesMidnightMidnightMidnight₹3 5800₹3 5800₹3 580022.93 9 And Compound Interest So E Node22.93 9 And Compound Interest So E Node22.93 9 And Compound Interest So E Nodefrom Love Comp round interest Amount - Pimplefrom Love Comp round interest Amount - Pimplefrom Love Comp round interest Amount - PimpleNow we have 10 inch plus shyam subscribe 0that yourthat yourthat yourin the third one is that you to calculatein the third one is that you to calculatein the third one is that you to calculatecompound interest one interested compoundcompound interest one interested compoundcompound interest one interested compoundquarter Okay now we have quarterquarter Okay now we have quarterquarter Okay now we have quartertaken so how do we finalize it quarterlytaken so how do we finalize it quarterlytaken so how do we finalize it quarterlyfor that die plus got the amount isfor that die plus got the amount isfor that die plus got the amount isequal to principal plus one plus andequal to principal plus one plus andequal to principal plus one plus andpoint for multiple that android dresspoint for multiple that android dresspoint for multiple that android dresspower for more ok producer formula topower for more ok producer formula topower for more ok producer formula tocalculate compound interest waycalculate compound interest waycalculate compound interest wayto interest is compound watering this is theto interest is compound watering this is theto interest is compound watering this is theformula amount no way want to frontformula amount no way want to frontformula amount no way want to frontcompound interest subscribe ok latestcompound interest subscribe ok latestcompound interest subscribe ok latestsubscribe mount 00966 subscribe Now twosubscribe mount 00966 subscribe Now twosubscribe mount 00966 subscribe Now twopoint note compound interest to thepoint note compound interest to thepoint note compound interest to theprincipal 200 in 2009principal 200 in 2009principal 200 in 2009talking about our lineage and this first wetalking about our lineage and this first wetalking about our lineage and this first wewill convert this into hairs okay 180 no how towill convert this into hairs okay 180 no how towill convert this into hairs okay 180 no how toconvert months into two years boy divideconvert months into two years boy divideconvert months into two years boy divideit's equivalent to answer is equal tookay gold war find the mountokay gold war find the mountokay gold war find the mountThis principal plus rate appointmentclasses power in mount abu 400 just gorgeous principal thisclasses power in mount abu 400 just gorgeous principal thisclasses power in mount abu 400 just gorgeous principal thisjuice drink 1000 500 oneplus gratisjuice drink 1000 500 oneplus gratisjuice drink 1000 500 oneplus gratisthat syrup on hundred 400 multiply sonthat syrup on hundred 400 multiply sonthat syrup on hundred 400 multiply sonministry appointment points cancel swiftministry appointment points cancel swiftministry appointment points cancel swiftshow 156 252i office of fiction and 425 se zoi office of fiction and 425 se zoi office of fiction and 425 se zooneplus one upon 25years Power Pimple to OneAdhikari Noble Soul with 1505 Multiply byShyam Solve Will Get 300 Seats and Want to knowShyam Solve Will Get 300 Seats and Want to knowShyam Solve Will Get 300 Seats and Want to knowthe Principal for the The Compoundthe Principal for the The Compoundthe Principal for the The CompoundInterest is Compounded AnnuallyInterest is Compounded AnnuallyInterest is Compounded Annuallybut in other Cities Different for Differentbut in other Cities Different for Differentbut in other Cities Different for DifferentUses Winner Rates of Different OK SimultaneouslyUses Winner Rates of Different OK SimultaneouslyUses Winner Rates of Different OK SimultaneouslyShare The Like What is the First Year AndShare The Like What is the First Year AndShare The Like What is the First Year AndDifferent For Different In This Way They WantDifferent For Different In This Way They WantDifferent For Different In This Way They WantTo Know About The Difference Between The MountainTo Know About The Difference Between The MountainTo Know About The Difference Between The MountainPrinciple Multiply By OnePlus One UponPrinciple Multiply By OnePlus One UponPrinciple Multiply By OnePlus One UponIts First Day First Show 10 ShowsIts First Day First Show 10 ShowsIts First Day First Show 10 ShowsThat OnePlus Artery Upon Its Launch ItThat OnePlus Artery Upon Its Launch ItThat OnePlus Artery Upon Its Launch ItCosts Rs 900 Paunikar So After You WantCosts Rs 900 Paunikar So After You WantCosts Rs 900 Paunikar So After You WantTo calculate compound interest superhitTo calculate compound interest superhitTo calculate compound interest superhitprinciple from us ok latest exampleprinciple from us ok latest exampleprinciple from us ok latest examplepoint amount and compound interest andpoint amount and compound interest andpoint amount and compound interest andcalculate it the rate of interest is five centscalculate it the rate of interest is five centscalculate it the rate of interest is five centsfor the first year on board three cents for thefor the first year on board three cents for thefor the first year on board three cents for thesecond year and three cents for the third nine heresecond year and three cents for the third nine heresecond year and three cents for the third nine hereevery year rate Of interest in differentevery year rate Of interest in differentevery year rate Of interest in differentsizes for amala hair you see the principlesizes for amala hair you see the principlesizes for amala hair you see the principles given time to respond to a mountains given time to respond to a mountains given time to respond to a mountainprinciple daprinciple daprinciple dain 6000in 6000in 6000i one plus rate one for straight this 5.10 ai one plus rate one for straight this 5.10 ai one plus rate one for straight this 5.10 asecret one plussecret one plussecret one plusonly during the same third rate this oneonly during the same third rate this oneonly during the same third rate this oneplus this quarter inch 9 Quiteplus this quarter inch 9 Quiteplus this quarter inch 9 QuiteThat 1040That 1040That 1040Mein 104 Phone Hunted HaiMein 104 Phone Hunted HaiMein 104 Phone Hunted HaiKi End Bhala Kaun Bhala Versus Point Ok 9thKi End Bhala Kaun Bhala Versus Point Ok 9thKi End Bhala Kaun Bhala Versus Point Ok 9thCalculate 08 Trick Calculation Transfer 608Calculate 08 Trick Calculation Transfer 608Calculate 08 Trick Calculation Transfer 608Point 5 to 6 And You Want To CalculatePoint 5 to 6 And You Want To CalculatePoint 5 to 6 And You Want To CalculateCompound Interest 10th Simply SubscribeCompound Interest 10th Simply SubscribeCompound Interest 10th Simply SubscribeAmountAmountAmountEk Sexy Ulta 670 48.56 AndEk Sexy Ulta 670 48.56 AndEk Sexy Ulta 670 48.56 AndPrinciples Us Emphasis Us Se ZaPrinciples Us Emphasis Us Se ZaPrinciples Us Emphasis Us Se ZaA Stop Play ListA Stop Play ListA Stop Play ListNext One Is On Tax Plate CompoundNext One Is On Tax Plate CompoundNext One Is On Tax Plate CompoundInterest Benefits Compounded Annually ButInterest Benefits Compounded Annually ButInterest Benefits Compounded Annually ButTime Infection No Is Time Use Infection HowTime Infection No Is Time Use Infection HowTime Infection No Is Time Use Infection HowThey Can Find Boss Software Is TheThey Can Find Boss Software Is TheThey Can Find Boss Software Is TheFormula Mantis Principle One Plus RateFormula Mantis Principle One Plus RateFormula Mantis Principle One Plus RatePoint Them Must On OnePlusJoe Alarm Phone Aim Hundred 100Joe Alarm Phone Aim Hundred 100Joe Alarm Phone Aim Hundred 100Greatest Whose soldier sample ok thenGreatest Whose soldier sample ok thenGreatest Whose soldier sample ok thenyou will be clear with theyou will be clear with theyou will be clear with theexample example and compound interest 19example example and compound interest 19example example and compound interest 192008 04 2012new way to account calculate the compoundnew way to account calculate the compoundnew way to account calculate the compoundinterest you this front exit cigarette is in everyinterest you this front exit cigarette is in everyinterest you this front exit cigarette is in everymoment pachit how to find the mountmoment pachit how to find the mountmoment pachit how to find the mountassisi the formula 100assisi the formula 100assisi the formula 100Come to theCome to theCome to theprincipal is this 2000principal is this 2000principal is this 2000I one plus rate this temple percent per anI one plus rate this temple percent per anI one plus rate this temple percent per anupon he zare residence tourist 1.4 so nowupon he zare residence tourist 1.4 so nowupon he zare residence tourist 1.4 so nowwe this otherwise this our from here a quarter inchwe this otherwise this our from here a quarter inchwe this otherwise this our from here a quarter inchplus which this we here at 1.5 value and etcplus which this we here at 1.5 value and etcplus which this we here at 1.5 value and etcvirtues and this pointvirtues and this pointvirtues and this pointright Look again, what traction do we have,right Look again, what traction do we have,right Look again, what traction do we have,so one by one, coat, pants,so one by one, coat, pants,so one by one, coat, pants,what should we take, you and the leftovers here,what should we take, you and the leftovers here,what should we take, you and the leftovers here,we have this selection point, please let'swe have this selection point, please let'swe have this selection point, please let'sgo, plated 2000go, plated 2000go, plated 20002010 one plus one upon time list power two2010 one plus one upon time list power two2010 one plus one upon time list power twoto 1000 andto 1000 andto 1000 and200 2000200 2000200 2000Ki 11.1 Dress Power 2.21 Positive SonicallyKi 11.1 Dress Power 2.21 Positive SonicallyKi 11.1 Dress Power 2.21 Positive SonicallyCalculated 2000 KiCalculated 2000 KiCalculated 2000 Ki11.2 New Multiply By 11.111.2 New Multiply By 11.111.2 New Multiply By 11.1Multiply By Club 41.2 420 120 Cancel WithMultiply By Club 41.2 420 120 Cancel WithMultiply By Club 41.2 420 120 Cancel With4878 Calculation Dance Dentist4878 Calculation Dance Dentist4878 Calculation Dance DentistReplacement More Than 40 9 And CompoundReplacement More Than 40 9 And CompoundReplacement More Than 40 9 And CompoundInterest - Principal Mountains Us 2000 -Interest - Principal Mountains Us 2000 -Interest - Principal Mountains Us 2000 -Principal DrPrincipal DrPrincipal Dr128 Switch Sequel ₹2 forces128 Switch Sequel ₹2 forces128 Switch Sequel ₹2 forcesto Ajay\n"