Concepts: Compound Interest

# Concepts: Compound Interest Video Lecture | CSAT Preparation - UPSC

## CSAT Preparation

207 videos|156 docs|192 tests

## FAQs on Concepts: Compound Interest Video Lecture - CSAT Preparation - UPSC

 1. What is compound interest?
Compound interest is the interest calculated on the initial principal amount as well as the accumulated interest from previous periods. It means that the interest earned in each period is added to the principal, and then the interest is calculated based on the new total for the next period.
 2. How is compound interest calculated?
Compound interest can be calculated using the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.
 3. What is the difference between compound interest and simple interest?
The main difference between compound interest and simple interest lies in the way the interest is calculated. Compound interest takes into account the accumulated interest from previous periods, while simple interest is calculated only on the initial principal amount. This means that compound interest will grow faster over time compared to simple interest.
 4. How does compound interest affect savings and investments?
Compound interest has a significant impact on savings and investments. When saving or investing with compound interest, the interest earned in each period is reinvested, leading to exponential growth. This allows the savings or investments to grow at a faster rate over time, making compound interest a powerful tool for long-term wealth accumulation.
 5. What factors affect compound interest?
Several factors can affect compound interest, including the principal amount, the interest rate, the compounding frequency, and the duration of the investment or loan. Higher principal amounts, higher interest rates, more frequent compounding, and longer durations all contribute to greater compound interest earnings.

## CSAT Preparation

207 videos|156 docs|192 tests

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