Financial Mathematics → Interest → Simple Interest → Compound Interest → Varying Interest Rate
If we have varying interest rates. Like, interest rate is changing over the years, then we have
For example, if the annual interest rate for
Year-1 is 10%
Year-2 is 15%
Year-3 is 15%
Year-4 is 20%
Year-5 is 20%
Year-6 is 20%
Then the formula for the accumulated amount after 6 years is
Example 1. If the effective annual interest rate for year 1, 2 and 3 is 4%, 5% and 6% respectively. Then what will be the amount after three years of an investment of $1,000?
Solution:
Example 2. The effective compounding interest rate per annum is 7% but in two years it will reduced to 6%. What will be the accumulated amount after 5 years of an investment of $4,000?
Solution:
