A the future value of the investmentloan including interest P the principal investment amount the initial deposit or loan amount r the annual interest rate decimal n the number of times that interest is compounded per unit t t the time the money is invested or borrowed for. Start with the formula for compound interest shown below. It is to be noted that the above formula is the general formula for the number of times the principal is compounded in a year.
This formula models an exponential growth curve that is dependent the principle amount P rate of interest r the frequency of investment n and the time elapsed t.
He starts with explaining the basic concepts like principle which is the amount you borrow and the rate of interest or annual percentage rate APR which is the rate at which you pay the interest up on the borrowed principle. I also compare compound interest with simple interest. Second observe that r scales the input of the function horizontally. Yr 1 100 103 Yr 2 100 103 103 100 1032 Yr 3 100 103 103 103 100 1033.