Compound interest adds the interest earned in the previous period to the principal amount, so the interest from previous periods also earns interest. Then we plug in each value into the formula: So we will have \$1511.65 at the end of 3 years. For example, imagine you are started with \$1,000. The compound interest formula contains the annual percentage yield formula of. wikiHow, Inc. is the copyright holder of this image under U.S. and international copyright laws. ", "The clear step-by-step illustration was helpful. Research source. "wikiHow's articles are good for projects. Suppose that you take the total amount of money that you had after the first year in the previous problem and invest it in the same account for one more year. To calculate annual compound interest, you can use a formula based on the starting balance and annual interest rate. This image is not<\/b> licensed under the Creative Commons license applied to text content and some other images posted to the wikiHow website. This image may not be used by other entities without the express written consent of wikiHow, Inc.
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