Compound Interest Formula
Compound interest is calculated using the following formula:
P (1 + R/n) (nt) - P
Here P is principal amount.
R is the annual interest rate.
t is the time the money is invested or borrowed for.
n is the number of times that interest is compounded per unit t, for example if interest is compounded monthly and t is in years then the value of n would be 12. If interest is compounded quarterly and t is in years then the value of n would be 4.
Let’s say an amount of $2,000 is deposited into a bank account as a fixed deposit at an annual interest rate of 8%, compounded monthly, the compound interest after 5 years would be:
P = 2000.
R = 8/100 = 0.08 (decimal).
n = 12.
t = 5.
Let’s put these values in the formula.
Compound Interest = 2000 (1 + 0.08 / 12) (12 * 5) – 2000 = $979.69
So, the compound interest after 5 years is $979.69.
In this java program we are calculating the compound interest, we are taking the same example that we have seen above for the calculation.
public class JavaExample {
public void calculate(int p, int t, double r, int n) {
double amount = p * Math.pow(1 + (r / n), n * t);
double cinterest = amount - p;
System.out.println("Compound Interest after " + t + " years: "+cinterest);
System.out.println("Amount after " + t + " years: "+amount);
}
public static void main(String args[]) {
JavaExample obj = new JavaExample();
obj.calculate(2000, 5, .08, 12);
}
}
Output:
Compound Interest after 5 years: 979.6914166032102
Amount after 5 years: 2979.69141660321
