When the amount after the first unit of time becomes the Principal for the second unit of time and so on, after fixing a certain unit of time, say yearly or half-yearly or quarterly to settle the previous amount.

This difference between the Amount and the Principal after a specified period is called Compound Interest.

Important Compound Interest Formula

When the interest is compounded annually –

Amount =

When the interest is compounded Half-yearly –

Amount =

When the interest is compounded quarterly –

Amount =

When the interest is compounded annually but time is in the fraction, say –

Amount =

When rates are different for different years, say for Ist, 2nd, and 3rd year respectively-

Amount =

Examples-

Q-1. Find the compound interest on Rs. 7500 at 4% p.a for two years compounded annually?