# Difference between revisions of "Compound Interest Formula"

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== Formula == | == Formula == | ||

:<math> | :<math> | ||

− | CI = [ \prod_{i=1}^{d_b} (1 + \frac{r_i \times n_i}{N}) - 1 \ \times \frac{N}{d_c} | + | CI = \left[ \prod_{i=1}^{d_b} (1 + \frac{r_i \times n_i}{N}) - 1 \right] \ \times \frac{N}{d_c} |

</math> | </math> | ||

+ | |||

+ | Where | ||

+ | * <math>d_b</math> is the number of business days in the interest period | ||

+ | * <math>d_c</math> is the number of calendar days in the interest period | ||

+ | * <math>r_i</math> is the interest rate applicable on business day i | ||

+ | * <math>n_i</math> 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 == | == See Also == | ||

− | * [[Simple Interest | + | * [[Simple Interest Formula]] |

+ | |||

+ | ----- | ||

[[Category:Interest Rate Risk]]] | [[Category:Interest Rate Risk]]] |

## Latest revision as of 11:58, 11 June 2019

## 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

]