Compounding

Compounding

Compounding is the process where interest earned also starts earning interest.

Formula

Future Value (FV)

FV = PV (1+r)^n

Where:

• PV = Present value

• r = interest rate

• n = number of years

Example

• • • Investment = ₹10,000

    • Interest = 10%

    • Years = 3

    • FV = 10000(1.10)^3

    • FV = 10000 × 1.331 = 13,310

    • After 3 years → ₹13,310