When a sum of money is borrowed for a period, an extra amount has to be paid along with the borrowed money. The fixed rate of the extra amount is called **interest**. The interest are of two types: Simple interest and compound interest. Compound interest is the total interest that includes the original interest and the interest of the new principal which is obtained by adding the original principal to the due interest.

The **Compound Interest Formula** is given as,

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The solved problems on compound interest are given below: ### Solved Examples

**Question 1: **A sum of Rs 5000 is borrowed and the rate is 8%. What is the compound interest for 2 years?

** Solution: **

Compound Interest = Principal$(1+Rate)^{Time}$ - Principal

Compound Interest = 5000$(1+\frac{8}{100})^{2}$ - 5000

Compound Interest = 5000 $\times$ 1.1664 - 5000

Compound Interest = 832

The compound interest for 2 years is Rs 832

**Question 2: **A sum of Rs 20000 is borrowed and the rate is 10%. What is the compound interest for 5 years?

** Solution: **

Compound Interest = Principal$(1+Rate)^{Time}$ - Principal

Compound Interest = 20000$(1+\frac{10}{100})^{5}$ - 20000

Compound Interest = 20000 $\times$ 1.61051 - 20000

Compound Interest = 12210.20

The compound interest for 2 years is Rs 12210.20

Compound Interest = Principal$(1+Rate)^{Time}$ - Principal

Compound Interest = 5000$(1+\frac{8}{100})^{2}$ - 5000

Compound Interest = 5000 $\times$ 1.1664 - 5000

Compound Interest = 832

The compound interest for 2 years is Rs 832

Compound Interest = Principal$(1+Rate)^{Time}$ - Principal

Compound Interest = 20000$(1+\frac{10}{100})^{5}$ - 20000

Compound Interest = 20000 $\times$ 1.61051 - 20000

Compound Interest = 12210.20

The compound interest for 2 years is Rs 12210.20

More topics in Compound Interest Formula | |

Daily Compound Interest Formula | Monthly Compound Interest Formula |