Simple and compound interest

Interest calculated on the original principal for the entire period that is borrowed or invested.

Simple interest

What is the formula for simple interest?

I = P x r x t

P = principle amount
R = interest
T = time in years

The sum of principal amount and the interest earned within the period

Final amount or maturity value or future value (F)

What is the formula for final amount or maturity value or future value (F)

F = P + 1 or F = P (1 + rt)

computed and settled on the basis of 360 - day year (I o)

Ordinary Interest (Io)

Computed and settled on the basis of a 365 - day year

Exact interest

What is the formula for Ordinary interest?

1o = Pr (t/360)

What is the formula for Exact interest?

IE = Pr (t/365)

It is an interest computed every conversion period whose principal amount includes the interest earned every end of the conversion period.

Compound interest

What is the formula for compound interest?

F = P ( 1 + r/m) ^mt

F = future value
P = principle amount
R = interest rate
M = compounding periods
T = time in years

F = P ( 1 + r/m) ^mt

F = future value
P = principle amount
R = interest rate
M = compounding periods
T = time in years

Conversion period (m)
1
2
4
5
12
365

Annually
Semi-annually
Quarterly
Every 2 months
Monthly
Daily

The future value of P compounded continuously at an annual rate r at time t is given by,

F = Pe^rt

Continuous compounding

What is the formula for continuous compounding?

F = Pe^rt