How is compound interest calculated, and how is compound interest calculated

The formula for calculating compound interest is:

Where: p=principal; i = interest rate; n = holding period.

Compound interest = principal * (1 + i) to the n power, n represents the number of interest-bearing periods, i represents the interest rate, assuming that the principal is 1000 yuan, the interest is calculated every six months in the case of an annual interest rate of 5%, asking in the case of compound interest, what is the sum of principal and interest after two years? That is: 1000 (1+5% 2) to the power of 4 = yuan.

This is what used to be called a profit roll.

Compound interest = principal * (1 + i) n, n represents the number of interest-bearing periods, i represents the interest rate, assuming that the principal is 1000 yuan, and the interest rate is 5% per half. : 1000 (1 + 5% 2) 4 = yuan. The so-called profit rolling.

The formula for calculating compound interest is: f=p*(1+i) n.

f - terminal value (the value of the capital at the end of the n-term or the sum of principal and interest, future value), which refers to the value of the capital at the end of a particular time series (or converted to) a specific time series.

p—Present value (i.e., the present value of the money), which refers to the value of the money at the beginning of a particular time series (or converted to) a particular time series.

i—Compound interest rate for interest-bearing periods.

n — the number of interest-bearing periods.

The characteristic of compound interest calculation is that the sum of the principal and interest at the end of the previous period is used as the principal of the next period, and the amount of the principal of each period is different when calculating.

There are two ways to calculate interest:

1. Interest formula:

Sum of principal and interest = principal * (1 + interest rate) number of periods.

Ordinary annuity is the most basic form of annuity, which refers to a series of payments received and paid in equal amounts at the end of each period within a certain period of time from the first period.

The final value of an ordinary annuity refers to the sum of principal and interest at the time of the last receipt and payment of an ordinary annuity, which is the sum of the compound interest final value of each receipt and payment.

The present value of an ordinary annuity is the sum of the present value of an equal amount received and paid at the end of each period at the same time interval to the beginning of the first period.

2. Formula for the final value and present value of ordinary annuity:

The final value of ordinary annuity = a (f a, i, n), (f a, i, n) is the coefficient of the final value of ordinary annuity.

The present value of the ordinary annuity = a (p a, i, n), (p a, i, n) is the present value coefficient of the ordinary annuity.

The formula for calculating compound interest is:

Where: p=principal; i = interest rate; n = holding period.

1. Interest (year) = principal annual interest rate (percentage) deposit period.

or Interest = Principal Interest Rate Time.

Deposit interest = principal number of days listing interest (daily interest rate) = number of interest-bearing days daily interest rate.

Interest tax = interest on deposits (amount of income tax payable) Applicable tax rate.

2. The formula for calculating compound interest is:

Formula for the final value of compound interest: f=a*(1+i) n

Deposit A at the beginning of the period, with i as the interest rate, and the sum of the principal and interest after depositing n periods.

Multiply the principal by 5% of the interest rate to get the interest for the current year, if it is a simple interest method, the interest earned this year will not be included in the principal of the next year; In the case of compound interest method, the interest earned this year will be included in the principal of the next year and then calculated as interest. For example, if the interest is calculated according to the loan term of 200,000 yuan for 1 year, then the interest is 200,000 * 5% = 10,000 yuan.

Many people think that compound interest is more expensive than simple interest, but in fact, it is not, because when compound interest is compounded, the bank will reduce a certain handling fee, so that compound interest is more preferential than simple interest. Simple interest: refers to the calculation of interest on a fixed principal.

Compound interest: refers to the first period of interest, the second principal includes the principal and the first interest, and the interest is calculated for the principal at one time. Compound interest is also called rolling interest.

In fact, both of these are ways to calculate interest, if you are depositing in the bank, you can choose compound interest, after all, there are more compound interest drafts when depositing, if you are taking out a loan in a bank, you should choose simple interest in the absence of preferential conditions, do not choose compound interest.

Expand: Interest rates

a) Interest rates. The ratio of interest to the total amount of loan funds over a certain period of time is the expression of loan**. That is: interest rate = interest amount loan principal.

The lender determines the lending interest rate with the lending bank in accordance with the benchmark interest rate and interest rate fluctuation space announced by the relevant laws and regulations of each country.

2) Benchmark interest rate.

The benchmark interest rate is the interest rate that has a general reference role in the financial market, and other interest rate levels or financial assets** can be determined based on this benchmark interest rate level. The benchmark interest rate is one of the important prerequisites for interest rate liberalization, in which the financier measures the financing cost, the investor calculates the investment return, and the management regulates the macroeconomy. Objectively, it is required to have a generally accepted benchmark interest rate level as a reference.

Therefore, in a sense, the benchmark interest rate is the core of the formation of the market-oriented mechanism of interest rates. The larger the benchmark interest rate, the more interest rates will rise; The smaller the benchmark rate, the smaller the interest.

How to get the lowest bank loan interest rate

1. Choose the bank with the lowest interest rate to apply for a loan.

Although the central bank has issued a benchmark interest rate, the interest rate of all banks will rise above the benchmark interest rate, and the specific increase will vary from bank to bank. So in order to get the lowest bank loan rate, you have to "borrow to three banks" and choose the bank with the lowest interest rate.

2. Pay attention to personal credit reporting and maintain good credit reporting.

The bank's loan interest rate is calculated by the computer according to the individual's credit, income, work and other information, in the case of other circumstances can not be changed, we can only maintain a good credit, try to repay the credit card on time, to avoid overdue.

The formula for calculating compound interest is to calculate the interest regeneration interest of the previous period, which is included in the repeated calculation of interest on the principal, that is, "profit generation" and "interest rolling".

Calculation formula: f=p*(1+i) n

f=a((1+i)^n-1)/i

p=f/(1+i)^n

p=a((1+i)^n-1)/(i(1+i)^n)

a=fi/((1+i)^n-1)

a=p(i(1+i)^n)/(1+i)^n-1)

f: Future value, or future value, that is, the value of the sum of principal and interest at the end of the period.

p: Present value, or opening amount.

a: annuity, or equivalent.

i: Interest rate or discount rate.

n: the number of interest-bearing periods.

The characteristic of compound interest calculation is that the sum of the principal and interest at the end of the previous period is used as the principal of the next period, and the amount of the principal of each period is different when calculating. The formula for calculating the principal and interest of compound interest is: f=p(1+i) n

There are two types of compound interest calculation: intermittent compound interest and continuous compound interest. The method of calculating compound interest on a regular basis (e.g. annual, half-yearly, quarterly, monthly or daily, etc.) is intermittent compounding; The method of calculating compound interest on an instantaneous basis is continuous compounding. In practical application, the calculation method of intermittent compound interest is generally adopted.

Present value of compound interest. The present value of compound interest refers to the principal amount that must be invested in order to reach a specific amount of money in the future in the case of calculating compound interest. The so-called compound interest, also known as interest on plus interest, refers to the method of making a new round of investment with interest after a deposit or investment has been returned.

Compound interest terminal value. The final value of compound interest refers to the sum of the principal at the end of the agreed period after the interest is obtained within the agreed period, the interest is added to the principal and the interest is recalculated, and the sum of the principal at the end of the agreed period is rolled over to the agreed period.

Can the interest on private loans be compounded?

1.Interest (year) = principal Annual interest rate (percentage) Deposit period or interest = principal Interest rate Time Deposit interest = principal Number of days Listing interest (daily interest rate) = number of interest-bearing days Daily interest rate Interest tax = deposit interest (income tax payable) Applicable tax rate.

2.The formula for calculating compound interest is: Formula for the final value of compound interest: f=a*(1+i) n deposit a at the beginning of the period, with i as the interest rate, and the sum of the principal and interest after depositing n periods.

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