Compound Interest Formula Investment

Posted by Grace under Investing on August 23, 2015

Looking for compound interest formula investment? Compound interest formula has five symbols, P: principal, A: amount, r: rate of interest, n: number of times compounded per year, nt: time in years. I will give you the compound interest formula that I found from math books.

What is mean by Compound Interest?
In our previous topic, we defined compound interest as an interest gained added to the original or principal investment or loan.


Related: Albert Einstein Discuss Compound Interest

Compounding Interest Formula Investment

Below image is the formula on how to calculate compound interest. When an investor will decide to reinvest his profits (might a profits in stocks, mutual funds, bonds, business, savings, time and check deposits, any financial products that is earning an interest can use a compound interest), will use the following formula to know the future value of his investment.

compound interest formula

Note: If you want to calculate compound interest easily, you may find our latest review about compound interest calculator with inflation rates. We will post some updates and other formulas if we found one.

Example of Compounded Investment

No. Contribution Interest Future Value Present Value
1 10,000 1,500 11,500 11,500
2 10,000 3,225 13,225 13,225
3 10,000 5,208 15,208 15,208
4 10,000 7,490 17,490 17,490
5 10,000 10,113 20,113 20,113

Related: Calculate the Future Value of Your Investment

The table above is the result of compound interest using the formula. The amount of contribution is 10,000 dollars but how come it became 20,113 dollars after 5 years? Well, that’s the magic of compound interest. Take advantage of it especially if you are still young. The more years your money will stay invested, the more chances it will grow. If you liked this example of compound interest formula, please share with your friends.

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