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**. 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. For monthly compound
interest, the interest in compounded all months in a year.

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

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

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

** Solution: **

Monthly Compound Interest = Principal$(1+\frac{Rate}{12})^{12*Time}$ - Principal

Monthly Compound Interest = 5000$(1+\frac{8}{100*12})^{2*12}$ - 5000

Monthly Compound Interest = 5000 * 1.179 - 5000

Monthly Compound Interest = 864.439

The monthly compound interest for 2 years is Rs 864.439

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

** Solution: **

Monthly Compound Interest = Principal$(1+\frac{Rate}{12})^{12*Time}$ - Principal

Monthly Compound Interest = 20000$(1+\frac{10}{100*12})^{5*12}$ - 20000

Monthly Compound Interest = 20000 * 1.645 - 20000

Monthly Compound Interest = 12906.179

The monthly compound interest for 5 years is Rs 12906.179

Monthly Compound Interest = Principal$(1+\frac{Rate}{12})^{12*Time}$ - Principal

Monthly Compound Interest = 5000$(1+\frac{8}{100*12})^{2*12}$ - 5000

Monthly Compound Interest = 5000 * 1.179 - 5000

Monthly Compound Interest = 864.439

The monthly compound interest for 2 years is Rs 864.439

Monthly Compound Interest = Principal$(1+\frac{Rate}{12})^{12*Time}$ - Principal

Monthly Compound Interest = 20000$(1+\frac{10}{100*12})^{5*12}$ - 20000

Monthly Compound Interest = 20000 * 1.645 - 20000

Monthly Compound Interest = 12906.179

The monthly compound interest for 5 years is Rs 12906.179