A P1 rnnt If you want to try to see whats going on behind the scenes in our calculator heres how to do the math yourself using the compound interest formula. For a 4 rate use 004 n The number of compounding periods. The formula for calculating compound interest is.
This means that at the end of the first year youll receive 1 extra dollar.
It is the result of reinvesting interest rather than paying it out so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound Interest is calculated using the formula given below. Heres how you would get that answer using the formula and applying it to the known variables. By multiplying the original principal by the second portion of the formula the interest earned is 12683.