Compound Interest

intermediate26 min read

The compound-interest formula, compounding more often than yearly, the difference between compound and simple interest over two and three years, and how to read compound interest as repeated percentage change.

What you will be able to do

Apply the compound-interest formula for yearly and more frequent compounding.
Compute the gap between compound and simple interest for two and three years.
See compound interest as a chain of identical percentage increases.
Recover the principal or rate from a compound-interest fact.

What is inside this lesson

1What compound interest is
2The formula
3The gap between compound and simple interest
4Worked example: two-year compound interest
5Worked example: principal from the CI minus SI gap
6Worked example: half-yearly compounding
7Common mistakes
8Quick revision

The lesson itself is for members

Reading the 8 sections above, the worked examples and the practice set is free — the whole knowledge base is on the free plan, along with flashcards, private notes and Ask Onely.

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