And lets say that the account is compounded yearly. Then the following year the interest is calculated using the new total of the loan. Of each year they add the yearly interest 12 to your account.
Thus the more interest that has accrued the larger the amount of the next interest payment.
Compound Interest in Maths. The formula for compound interest is P 1 rn nt where P is the initial principal balance r is the interest rate n is the number of times interest is compounded per time period and t is the number of time periods. Lets invest 100 in an account that pays 12 interest each year. Revision Village - Voted 1 IB Mathematics Studies Resource in 2018 2019.