Compound Interest

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What is Compound Interest?

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Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It is commonly used in finance and investments.

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How is Compound Interest calculated?

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The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest. P is the principal amount, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years.

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What does 'Compounded Quarterly' mean?

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Compounded quarterly means that the interest is calculated and added to the principal four times a year.

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What does 'Semi-Annually' mean in terms of compounding?

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Semi-annually means that interest is compounded twice a year.

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What does 'Monthly' mean in terms of compounding?

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Monthly means that interest is compounded twelve times a year.

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If you invest $1,000 at an interest rate of 5% compounded annually, what will be the total amount after 3 years?

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A = 1000(1 + 0.05/1)^(1*3) = $1157.63.

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What is the difference between simple interest and compound interest?

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Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest that has already been added.

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What is the future value of an investment of $999 at an interest rate of 5.45% compounded quarterly for 19 years?

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The future value is $2794.10.

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How much will a loan of $195,000 at 4.3% interest compounded annually cost after 30 years?

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The total amount paid will be $689,546.99.

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What is the formula to find the total amount after a certain number of years with compound interest?

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The formula is A = P(1 + r/n)^(nt).