The compound Interest in Savings or Investment Accounts

Linda Goethe

Math 150: Section 39

December 16, 2012

An accounting or an auditor is assigned the job of managing a company’s finance. Then managers or company investors examine their reports to find out how company is doing. An accountant will have a good job opportunity. The demand for accountants increases as more private companies are established. In addition, there are always new and changing laws that increase the need for a person with these skills.

Compound interest is what banks normally use to calculate the interest on investments. It is the interest that occurs on the initial principal and the accumulated interest of a principal deposit, loan, or debt. Compound of interest allows a principal amount to grow at a faster rate than simple interest. This method is the equivalent of continuously recalculating the interest based on the current principal.

There are two different types of interest in Banking. Interest is the amount of money earned in a saving account. They are simple interest and compound Interest. Simple interest is the calculations refer to a type of interest calculation in which interest earnings are calculated only on the principal (original) amount of the investment. Compound interest is the calculations refer to a type of interest calculation in which earnings are calculated not only on the principal (original) amount of the investment, but also on the past interest earnings that are assumed to have been reinvested at the same rate. If the sum of money is invested for multiple years, interest paid is reinvested and future interest payments reflect interest earned on both the principal and the past interest earned.

Continuously Compound Interest Formula

Formula that we use is:

A = Pert

A = represents the amount of money after a certain amount of time.

P = represents the principal or the amount of money you start with.

R = represents the interest rate and...