Formula for Compound Interest

Theorem

Let $P$ be a principal.

Let $r$ be the interest rate for a given conversion period.

Let $n$ be the number of conversion periods.

The amount of compound interest paid on $P$ at the end of $n$ conversion periods is given by:

$I = P \paren {\paren {1 + r}^n - 1}$

Proof

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Sources

• 1998: David Nelson: The Penguin Dictionary of Mathematics (2nd ed.) ... (previous) ... (next): interest
• 2008: David Nelson: The Penguin Dictionary of Mathematics (4th ed.) ... (previous) ... (next): interest