Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. The total initial amount of the loan is then subtracted from the resulting value.
If interest is compounding daily, that means that there are 365 periods per year and that the periodic interest rate is. 00548%. The APY on the account would be: (1 + 2.00/365)365 – 1 = 2.02% APY.
If we have an investment that earns 5% compound interest and you want to know how much money you'll have after 3 years, you would plug the following values into the formula: A = P(1 + r/n)^nt. A = 1000(1 + 0.05/1)^3. A = 1000(1.05)^3.
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