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-a digital text book on compound interest
Compound interest is interest added to
the principal of a deposit or loan so that the added
interest also earns interest from then on. This addition
of interest to the principal is called compounding. A
bank account, for example, may have its interest
compounded every year: in this case, an account with
$1000 initial principal and 20% interest per year would
have a balance of $1200 at the end of the first year,
$1440 at the end of the second year, $1728 at the end of
the third year, and so on.
The child understands about Compound interest and
the ways to find it
The child understands the concept- Compound
The child compares the attributes of compound and
The child applies the knowledge in real life situations
The child develops interest to learn more in
Ramu has a bank account. He invested Rs 1000 in it.
The rate of interest was 60% per annum. After 2
months, he found that the amount in his account was
Rs 1102.5. He could not understand the calculation of
Rs 2.5. The amount according to his calculation was Rs
1100. He was puzzled
Here the case in Ramu’s account was not
The bank account was calculated on basis of
In compound interest , the interest from the first
month is also added to the amount and that amount is
taken as principle for calculating next month’s interest
Here , the interest for 1st month was 50 Rs and the
principle amount becomes Rs1050. The next month’s
interest was calculated for Rs 1050 and the interest got
was Rs 52.5
A= P (1+r/n)^nt
P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including
n = number of times the interest is compounded per year
An amount of Rs1,500.00 is deposited in a bank paying
an annual interest rate of 24%, compounded quarterly.
What is the balance after 6 years?