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Learning Objectives
What is Interest
What is simple Interest
What is compound Interest
Difference Between Simple& Compound

Interest
Formula 0f Compound Interest
Why we have to know about Compound
Interest
Application of Compound Interest

What is interest?

interest is the charge for the privilege

of borrowing money, typically expressed
as annual percentage rate
or
Extra money paid for using others
money is called Interest

What is simple interest

Simple Interest equals the

principle times the rate of
interest times time
I=pin

What is Compound Interest

if at the end of a payment period
interest due is at the same rate then
the interest as well as reinvested at
the original principle will earn
another interest during the next
payment period. Interest paid on
interest
reinvested
is
called
Compound interest

Difference between simple

&Compound Interest
Simple: only calculated interest on
deposit money/principle
Compound: Calculated interest not
only principle but also an interest

Factors of compound Interest

Compound interest depend on following
factors
Rate Of interest
Time Period
Principle

Formula of Compound Interest

F= p(1+I)^n
where, F=Future Value
p=Present value
R=Rate Of Interest per year
M=No of compounding periods
per year
i=R/m =Rate of Interest per
period
N=Total No of period
Also Compound Interest=F-P

Continued
Compounded = M
Yearly/ annualy=1
Semi annualy=2
Half Yearly=2
Quarterly = 4
Monthly = 12
Weekly = 52
Daily =365

Why we have to know

compound Interest?
Calculation
Generating Profits
Ensuring Pension

Payments

Applications Of Compound Interest

If $500 were invested for 8

years at interest Rate6%
compounded Quarterly then
what will be compound
Interest?

Thank you
Any Question......????