The concept of profit and loss, VAT and C.I involves the application of The rate of interest becomes half when interest is compounded ______ fill up
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You have learned about the simple interest and formula for calculating simple interest and amount. Now, we shall discuss the concept of compound interest and the method of calculating the compound interest and the amount at the end of a certain specified period. We shall also study the population growth and depreciation of the value of movable and immovable assets.
If the borrower and the lender agree to fix up an interval of time (say, a year or a half year or a quarter of a year etc) so that the amount (Principal + interest) at the end of an interval becomes the principal for the next interval, then the total interest over all the intervals, calculated in this way is called the compound interest and is abbreviated as C.I.
Compound interest at the end of a certain specified period is equal to the difference between the amount at the end of the period and original principal i.e. C.I. = Amount – Principal. In this section, we shall discuss some examples to explain the meaning and the computation of compound interest. Compound interest when interest is compounded annually.