How to Calculate Interest Accumulation
- 1). Divide the annual rate of interest accumulation by the times each year the accumulated interest gets added to the account. For example, if your annual rate of interest accumulation equals 8.5 percent and interest accumulated gets added to the account twice a year, divide 0.085 by 2 to get a periodic rate of interest accumulation of 0.0425.
- 2). Add 1 to the periodic interest accumulation rate. In this example, add 1 to 0.0425 to get 1.0425.
- 3). Raise the result to nth power, with n equaling the number of times accumulated interest gets added to the account over the time interest accumulates. In this example, since interest is added twice per year, if you were to allow the interest to accumulate for one year, raise 1.0425 to the second power to get 1.08680625.
- 4). Subtract 1 from the result to find the effective interest accumulation rate expressed as a decimal. In this example, subtract 1 from 1.08680625 to get 0.08680625.
- 5). Multiply the effective interest accumulation rate by the original amount on which interest accumulates to find the total interest accumulation. Completing this example, if you started off owing $7,270, multiply $7,270 by 0.08680625 to find the accumulated interest equals $631.08.
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