Compound Interest Worksheet

This worksheet will let you understand how to calculate Compound Interest for different compounding period. Compound Interest is also similar to the simple interest but sometimes it so happens that the borrower and lender agree to fix up a certain unit of time say monthly, quarterly, half-yearly and yearly basis to settle the previous account. In such cases the principal amount changes at every completion of unit of time in the agreement. As it changes in the way that the amount after the first unit of time becomes the principal for the second unit, the amount after the second unit of time becomes principal for third unit and so on. Once the specified time is completed, the difference between the amount and the money borrowed is called the Compound Interest for that period and it is often abbreviated as CI. The Calculator used to calculate it is called as Compound Interest Calculator. The following are the formulas employed in Compound Interest Calculation on different compounding periods

Compound Interest Formulas
Let the Principal = P, Rate = R% per year, Time = n years then the formulas as follows for different compounding periods
Annual Compound Interest can be calculated from the below formula:
Amount = P (1 + R/100)n

Half-yearly Compound Interest can be calculated from the below formula:
Amount = P (1 + (R/2)/100)2n

Quarterly Compound Interest can be calculated from the formula given below:
Amount = P (1 + (R/4)/100)4n

The below formula is used when interest is compounded annually but the time is in fraction, say 3.4 years
Amount = P (1 + R/100)3 x (1 + 0.4 xR/100)

When Rates are different for different years, say R1%, R2%, R3% for 1st, 2nd, 3rd year respectively
Amount = P (1 + R1 / 100) x (1 + R2 / 100) x(1 + R3 / 100)

Present worth of USD. X due n years hence is given by:
Present Worth = x / (1 + R/100)n

Compound Interest Calculation Example
Find the compound interest on 6250$ at 16% per annum for 2 years, compounded annually
Solution:
Amount = 6250 x (1 + 16/100)2
= 6250 x 29/25 x 29/25
= 8410
C.I = 8410 - 6250
= 2160$
Therefore the Compound interest for above example is 2160$

Examples to Practice Yourself
The below are the compound interest problems to be practiced yourself

1. Find the compound interest on USD 20000 at 20% percent interest rate per year for 8 months, compounded quarterly

2. Find compound interest on USD 7500 at 12% per annum for 7 years, compounded annually

3. A sum of money doubles itself at compound interest for 9 years. In how many years will it become 7 times?

4. A Man borrowed USD 5000 at 15% per annum simple interest and immediately lent the whole sum at 15% per annum compound interest. What does he earn at the end of 7 years?

You can get your answers verified by using this answers of the online compound interest calculator. We hope that the above compound interest worksheet is an enough walk through and the examples given are useful to understand the concept of compound interest calculation


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