Monthly Compound Interest Formula

Compound interest is an interest of interest to the principal sum of a loan or deposit. The concept of compound interest is the interest adding back to the principal sum so that interest is earned during the next compounding period.

The formula is given as:

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

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


Practise This Question

Let’s assume you are a student of Arrhenius. He asked you to calculate Ea for a reaction so that he can study a reaction on which he is working for a long time. He told you the rate constants of the reaction at 500 K and 700 K are 0.02s1 and 0.07s1 respectively. Calculate the value of Ea.