Asked by dharm desai | 1st Jun, 2014, 12:51: PM

Expert Answer:

If in a bank, a sum of money is deposited for one year, we will gain a small sum of money as interest and it is called simple interest.
If the interest is calculated more than once a year, it is called the compound interest.
We will use the following formula to find the compound interest of the deposited sum.
A equals P open parentheses 1 plus r over n close parentheses to the power of n t comma space end exponent w h e r e space P equals p r i n c i p a l space a m o u n t r equals a n n u a l space r a t e space o f space i n t e r e s t space left parenthesis a s space a space d e c i m a l right parenthesis t equals n u m b e r space i f space y e a r s space t h e space a m o u n t space i s space d e p o s i t e d space o r b o r r o w e d space f o r. A equals A m o u n t space o f m o n e y space a c c u m u l a t e d space a f t e r space n space y e a r s. n equals n u m b e r space o f space t i m e s space t h e space i n t e r e s t space i s space c o m p o u n d e d space p e r space y e a r.
When computers were not there in good olden days, Banks used to calculate the compound interest quarterly.
And in turn people in bank need to work more to compute compound interest quarterly.
Today it's possible to compound interest monthly, daily, and in the limiting case, continuously, meaning that your
balance grows by a small amount every instant, with the help of computers.
Thus, the formula of interest compounded n times per year:
Syntax error from line 1 column 1659 to line 1 column 1669. Unexpected 'tiny'.
You may find it difficult to understand this, as this concept is beyond your curriculum.

Answered by Vimala Ramamurthy | 1st Jun, 2014, 01:31: PM

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