What is Compound Interest and Future Value?
Compound interest is calculated on the initial amount borrowed or invested plus any interest that is either charged or earned respectively. We use the compound interest formula to calculate the future value of the loan or investment. The following post will focus on the following:
- Compound interest and how it works
- Calculating future value and interest earned using the Compound Interest Formula
- Practical examples involving rearranging the formula
- Examples where it is not compounded annually, e.g. fortnightly, monthly, quarterly compounds.
How Does Compound Interest Work?
The following video introduces the concept.
How to Calculate Future Value and the Interest Earned
The following videos explain how to perform calculations using the formula.
Practical Example – Rearrange the Formula
The following video explains how to calculate how much you may need to invest to reach $x by rearranging the formula.
Examples Where it is Not Compounded Annually
The following video explains how to solve problems that are not compounded annually.
Want to learn more? Check out more of our HSC Standard Maths resources here!