The compound interest calculator allows you to calculate how much you can save when depositing funds in a bank. It can also be used to work out the interest pain on a loan. We provide a detailed example of compound interest calculation below the calculator and a link to our supporting tutorial on compound interest calculation and other percentage change mathematics.
The following extract is from our Math Tutorials on Percentages, specifically tutorial 5.4 - Applications of Percentage in Banking. Simple and Compound Interest
Before explaining the other type of interest applied in banking (compound interest), it would be appropriate to explain the general concept of compound percentage change. It is different from the simple percentage change, as a compound percentage change involves a recurrent percentage change applied each time on the actual value rather than on the initial value.
For example, if we have a compound percentage increase (growth) of the number of bacteria in a sample by 20% each hour and the original number of bacteria is 4,000 (A0 = 4,000), the number of bacteria in the sample after 3 hours (A3) will be calculated through repeated calculations based on the actual value, i.e.
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