Compounded Interest (Future Value)

Compound interest is when interest is immediately re-invested.
This is an example of a Geometric Sequence where a series of numbers are multipled by a fixed amount.


Annual Compounding

If you invested £50 today how much would you have after 3 years if the interest rate is 6% with annual compounding?

If you invested £50 today how much would you have after 185 days</b> if the interest rate is 6% with annual compounding?


Semi-Annual Compounding

If you invested £50 today how much would you have after 3 years if the interest rate is 6% with semi-annual compounding?
Semi-annual compounding means that the interest is calculated and re-invested every 6 months.


Quarterly Compounding

If you invested £50 today how much would you have after 3 years if the interest rate is 6% with quarterly compounding?


Monthly Compounding

If you invested £50 today how much would you have after 3 years if the interest rate is 6% with monthly compounding?


Daily Compounding

If you invested £50 today how much would you have after 3 years if the interest rate is 6% with daily compounding?


Important

The higher the interest rate the larger the future value
The shorter the compounding period, the larger the future value.
It is common to compute the future value of $1, then multiply it by the original amount.


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