# 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**

## Related Topics