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Interest Formula

About Interest Formula

The term "interest" refers to the additional amount earned by an investor and their investment (or the amount owed by a borrower in addition to the amount lent). Simple interest and compound interest are the two types of interest. The interest formula goes into greater detail regarding the many forms of interest. First, let's look at the interest calculation and work through some cases.

What is the interest formula?

  • Simple interest and compound interest are both included in the interest formula. The interest is the fee paid to the lender for lending a loan. This additional sum, or interest, must be paid in addition to the loan itself. Both the Simple Interest Formula and the Compound Interest Formula are discussed in the interest formula. For both, the interest formula is:
    • P R T = Simple Interest
    • Compound Interest = P (1 + r/n)nt- P

Simple interest formula

  • The following formula is used to compute simple interest: S.I. = P × R × T. Where P = principal denotes the bank's initial amount borrowed or invested.
  • R = Rate of Interest, which is the rate at which the principal amount is delivered to someone for a specific period of time; the rate of interest can be 5%, 10%, or 13%, for example, and is expressed as r/100. T stands for time, and it refers to how long the principle amount is supplied to someone.
  • The amount is the amount of money that a person borrows from a bank and must repay the principal plus interest. Amount = principal + Simple Interest, in other words,
    • A = P + SI
    • A = P + PRT
    • A = P (1 + RT)

Compound Interest Formula

  • After determining the entire amount over a period of time, based on the rate of interest and the beginning principal, compound interest is determined. The compound interest formula is as follows:
    • CI = P (1 + r/n)nt- P
  • P denotes the main amount, r is the annual interest rate, n is the number of times the interest is compounded annually, and t is the total duration.

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