compOuND InTEReSt fOrmula..

ORIGINAL PRINCIPAL= P
PERIODIC INTEREST RATE= i
NUMBER OF INTEREST PERIODS IN THE INVESTMENT PERIOD= n
FUTURE VALUE after n interest periods= S

When you place an initial amount P into an account, it is called the principal. In a compound interest account the following happens. The money in your account grows to an amount S after n periods. (The number n here identifies the number of periods your money stays in the account without any withdrawals, or deposits, except for interest payments at the end of each period.) The amount S is given by the compound interest formula

Start Investing Early and Compound Interest Will Work Hard for you
Start investing early and often. Time is a dimension that we have zero control over. You can start off by investing $20 a month when you’re 20, and will end up with more money than someone who started investing $100 a month when they’re 30. Money can be replicated, but time is irreplaceable.

Small amounts count. When I learned this equation in school, I believed the magic of compound interest only applied to large sums of money. I was wrong. $1 will compound as much as $100, provided that annual returns are equivalent. If you have $20 left over from your monthly budget, then re-invest the money so you can earn more money later.


S = P(1+i)n

In this formula, the interest rate per period is given by the quantity i. The formula should only be used when interest is compounded. Again, compounded means the interest is reinvested at the end of each period with no other deposits or withdrawals, Each interest payment deposited in your account then earns interest (rent from the bank) in the following periods.

Step1. Learn what compound interest is. Compound interest is interest paid on the principal loan or investment sum combined with interest on any outstanding interest incurred.
Step2. Gather some basic facts about the loan or investment you want to calculate compound interest for. You will need to know the principle amount you started with, the yearly rate of interest paid and the number of years you want to calculate the interest.
Step3. Use the formula S = P(1+i)^n where "S" equals the final result, "P" is the principle, "i" is the yearly interest rate and "n" is the number of years you want to figure the interest for.
Step4. Start by working the part of the formula in parenthesis. Add 1 to the yearly interest rate. Then, take that number to the power equal to the number of years you want to calculate the interest for. The power is calculated by taking the number times itself. For example, if you are figuring the interest over a 5 year period, you take the number times itself five times.
Step5. Take the result of the number in parenthesis and multiply it by the principle. The result is how much money will result from compound interest over the period of years you specified.
Step6. Try an example. To figure out how much money you will have in 5 years if you invest RM10,000 in a savings account that pays 3% interest, the formula would be S= 10,000(1 + .03)^5. 1 + .03 is 1.03 and 1.03 times itself 5 times is 1.1592. 10,000 times 1.1592 equals 11,592. So, after 5 years at 3% interest, RM10,000 becomes RM11,592.