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%

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Compound interest is the interest either loan or deposit, calculated on the initial deposit (principal) and the accumulated interest from the previous period.

Total interest = FV - P

Where:

FV = Future value

P = Initial principal balanceFormula:

FV = P x (1 +

)r n ^{(n x t)}FV = Future value (final amount)

P = The initial investment (initial principal balance)

r = Interest rate

n = Number of times compounded per year

t = Term (number of time periods)Formulas if there are contributions:

If the additional deposit is made at the end of the period, it can be the end of the month, quarter, year, etc...

FV = [P x (1 +

)r n ^{(n x t)}] + [PMT x [((1 +

)r n ^{(n x t)}- 1)÷

]]r n FV = [P x (1 + r ÷ n )

^{(n x t)}] + [ PMT x [((1 + r ÷ n)^{(n x t)}- 1) ÷ (r ÷ n)] ]If the additional deposit made at the beginning of period

FV = [P x (1 +

)r n ^{(n x t)}] + [[PMT x [((1 +

)r n ^{(n x t)}- 1)÷

]]x(r n 1 +

)]r n FV = [P x (1 + r ÷ n )

^{(n x t)}] + [[ PMT x [((1 + r ÷ n)^{(n x t)}- 1) ÷ (r ÷ n)] ] x ( 1 + r ÷ n )]Where PMT is the additional payment

If the periodic payment doesn't match the frequency of compounding.

Formula will be:

FV = [P x (1 + r ÷ n )

^{(n x t)}] + [ PMT x ([(1 + r ÷ n)^{(n x NP)}]^{(NP x t)}-1) ÷ [(1 + r ÷ n)^{(n x NP)}-1] ]Where NP is the number of payment per year

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