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| Topic | Can someone explain compounding math to me? |
| Anagram 11/28/20 9:14:30 PM #2: | There are two types of compounding interest, compound and continuously compounding. Either way, the idea is basically the same: you have your initial investment (called the Principle), which is increased by a percentage after some interval. The next interval, the percentage increase remains the same, but it's now applying to both the principle and the extra amount you added during the first interval. So, suppose you invest 100 dollars, and you get 50% interest at every interval. Initial Investment: 100 1st Interval: 150 2nd Interval: 225 3rd Interval: 337.5 Etc If you're using compound interest, the formula is P(1+r/n)^nt, where P: Principle R: Rate of Interest (expressed as a percentage, i.e. 5% interest is 0.05, and 100% interest is 1.00) N: Number of times interest is applied per time period T: Number of time periods elapsed If you're using continuously compounding interest, the formula is Pe^rt, where e is just the number e. I'm not sure what kind of math would give you 300% on the first interval, however. --- Not changing this sig until I decide to change this sig. Started: July 6, 2005 ... Copied to Clipboard! |
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