Compound interest is the interest accumulated from the total sum of money you have. Simple interest accumulates based on the intial sum whereas compound interest allows you to make interest off of your interest!
The equation for compound interest is: P = C(1+ r/n)nt
Where:
P = future value
C = initial deposit
r = interest rate (expressed as a fraction: eg. 0.06 for 6%)
n = # of times per year interest in compounded
t = number of years invested
The rule of 72 says that to find the number of years needed to double your money at a given interest rate, you just divide the interest rate into 72. For example, if the interest rate is 25% then you can double your money in three years.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment