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how do bank calculate interest? what is the formula for calculating compound interest?

2007-02-13 17:18:54 · 6 answers · asked by Taha B 1 in Business & Finance Taxes India

6 answers

The formula has been told to you above.
The bank pays Interest by taking your average balance from the 10th of every month to the last day of the month as principal amount and pays interest on this balance on the half-yearly compounding basis.
This is done every sixth month in your account.

If you want to cross check the amount of interest earned by you in your bank's saving account then it is going to be virtually impossible.
Try not to do so as it is beyond us. They have installed heavy computer for this purpose.

For more get in contact with me at agarwalapurav@yahoo.co.in

2007-02-13 19:40:21 · answer #1 · answered by apurav a 3 · 2 0

Answer:

Compound Interest is the interest on interest got previously(from first year of invest).

Total Amount got by Compound Interest = P[1+r/100]^n

where P = principal or premium invested initially.
r = percentage rate at which amount is compunded.
n = no of years for which the amount is compounded.

Compound Interest = Amount - principal.

The above formula is for amount compounded annually.

If compunded for every six months, n = 2 * no of years.

2007-02-14 01:38:23 · answer #2 · answered by Poornima G 2 · 0 0

CI = Principal x ( 1 + Rate ) to the power of no of years

2007-02-14 01:24:32 · answer #3 · answered by Anonymous · 0 0

C.I.=P[(1+r/100)^n - 1]

or

amount=P(1+r/100)^n
C.I. = amount - P

where P=Principle
r = rate of interest
n = time

2007-02-14 01:27:04 · answer #4 · answered by sanchina 1 · 0 0

int= prinsipal x (1+ interest rate)^no. of years

2007-02-14 01:32:21 · answer #5 · answered by ouch 1 · 0 0

http://en.wikipedia.org/wiki/Compound_interest

-:)

2007-02-14 01:35:22 · answer #6 · answered by Pinacolada 2 · 0 0

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