# Compound Interest Formula

From Open Risk Manual

## Definition

Compound interest is the cumulation of interest to the principal sum of a loan or deposit

## Formula

Where

- is the number of business days in the interest period
- is the number of calendar days in the interest period
- is the interest rate applicable on business day i
- is the number of calendar days for which rate ri applies (on most days, ni will be 1, but on a Friday it will generally be 3, and it will also be larger than 1 on the business day before a holiday).
- N is the market convention for quoting the number of days in the year.

## See Also

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