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2 2 COMPOUND INTEREST.
Compound Interest Computed Annually.
If the interest is not withdrawn, but added to the principal,
so that it will also draw interest, it is called compound interest.
Example.
What is the amount of #300, in 3 years, at b% ? The
interest is added to the principal at the end of each year.
Solution
:
Principal and interest at the end of first year,
105 X 300
100
Principal and interest at the end of second year,
105 X 315 =
100
Principal and interest at the end of third year,
’ 5
= #347.2875, = #347.29 = Amount.
100
When compound interest for a great number of years is to be
calculated, the above method of figuring will take too much
time, and the following interest tables, No. 2 and No. 3, are
computed in order to facilitate such calculations.
In Table No. 2, under the given rate-per cent., and opposite
the given number of years, find the amount of one dollar in-
vested at that rate for the time taken. Multiply this by the
principal invested and the product is the amount.
Example.
#400 is invested at o% compound interest for 17 years, com-
puted annually. What is the amount ?
Solution:
In Table No. 2, under 5%, and opposite 17 years, we find
2.292011. Multiply this by the principal.
Thus
:
2.292011
400
916.8044 = #916.80 = Amount.
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