# How to Calculate Compound Interest?

How do you calculate compound interest?

## Compound Interest Calculation

The compound interest is calculated to determine the amount of interest the lender will earn from the borrower for the principal amount lend for a period of time. Formula:
Compound Interest = Total Amount - Principal Amount Step 1: To Find Total Amount
Total Amount = P ( 1 + ( R / 100 ) ) n
Where,
P - Principal Amount
R - Interest Rate in Percentage
n - Number of time period to pay back the money Step 2: Now, let us try to find the compound interest for the below given problem.
Calculate the compound interest for the principal loan amount of Rs.72900 with an interest rate of 8% in 2 years.
Given,
Principal Loan Amount = Rs.72900
Rate of Interest = 8%
Number of Time Period = 2 Years.

First, Let us find the total amount
Total Amount = 72900 (1+(8/100))2
= 72900 x 1.1664
Total Amount = 85030.56 Step 3: To find the compound interest
Compound Interest = Total Amount - Principal Amount
Substituting the values in the above formula we get,
CI = 85030.56 - 72900
Compound Interest = 12130.56 