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compounding of interest refers to the action wherein, the interest paid to us over a period of time would increase gradually.
Ex: Lets say you invest Rs. 10000/- at 10% per annum which is compounded every quarter.
So interest for first quarter: Rs. 250/-
Principal at the end of first quarter: 10,250/-
Interest for second quarter: Rs. 256.25/-
Principal at the end of second quarter: 10,506.25/-
the increase in interest in the second quarter is because, the interest paid during the first quarter is also considered for interest payment in the second quarter. So, even though the principal amount we invested remains the same the interest varies because of compounding of interest.
The shorter the compounding period, greater is the interest earned.
Simple interest is to charge interest on the principle amount.
compound interest is the interest calculated on the simple interest!
Wiki User
∙ 11y ago
Wiki User
∙ 15y agoInterest calculated on the accumulated unpaid interest as well as on the original principal.
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Is the interest accrued on a student loan simple or compound interest?
its compound interest
Compound interest is interest paid on interest previously earned?
yes
What is the conclusion of compound interest?
The conclusion was when the interest was paid out.
Does the amount of interest earned each year increase decrease or stay the same in a simple interest account What about in a compound interest account?
Simple interest: stays the same. Compound interest: increases.
Does banks charge simple or compound interest on overdraft?
compound
How do you solve compound interest formula for n?
It depends on which compound interest formula you mean. Refer to the Wikipedia Article on "Compound Interest" for the correct terminology.
Which type of interest is calculated by adding the interest earned to the principal?
compound... yes it is compound interest.
What is the calculation for a simple compound interest rate?
There is simple interest and there is compound interest but this question is the first that I have heard of a simple compound interest.
What are the major differences between compound interest loan and simple interest loan?
With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.
Is the interest accrued on a student loan simple or compound interest?
its compound interest
What are some of the uses of compound interest in business?
compound interest increases interest more than simple interest
Which of the two is exponential function the simple or the compound interest?
Compound interest.
WHAT does the carrot in the formula for compound interest means?
There is no carrot in the compound interest formula!
What is earning interest on interest called?
Compound interest
Interest earned on interest is known as?
Compound Interest
What is 7.4 percent compound interest on 500.00?
The interest for 1 year is 37.00, whether it is simple or compound interest.
What is the effect of compound interest?
The effect of compound interest is that interest is earned on the accrued interest, as well as the principal amount.
