Compound Interest

Compound Interest

Earned Interest is added to the principal and the sum is treated as new principal for the calculation of the interest for the next period

Compound Amount

It is the original amount plus the compound interest

Compound Interest

It is the difference between compound amount and the original principal

Compounding

The interest is based on the present balance of principal

accrued

Simple interest is computed based on the original principal, while compound interest is based on ____ principal

Compound interest

It can make a deposit or loan increase higher at a faster rate

compounding

The amount of increase in compound interest depends on how often is the ____, the more frequent times of this the higher the compound interest

added

Simple interest when due the interest becomes a non-interest bearing debt, while compound interest when it is due, it is not paid rather it is ____ to become part of the principal

principal

In compound interest, compounding every period, interest is added to the ____ that increases its value

higher

The compound interest is ____ compared with simple interest

F

Compound Amount or Maturity

P

Present Value

r

Rate of interest

m

Number of interest period in one year

n

Number of interest periods multiply by the number of terms in one year

Nominal Rate

It is defined as the annual interest rate on which compound interest is computed

higher

The effective rate is ____ than the nominal rate

nominal

If the rate is not specified as nominal or effective, it is assumed that the rate is ____

Effective Rate

Interest rate compounded more than annually

Simple Interest

This interest grows slowly

Compound Interest

This interest accumulates at a faster rate

Simple Interest

Interest is paid only on the principal

Compound Interest

Interest is paid on both principal and interest, compounded at a regular intervals