Answer
When compound interest is discussed, the time rate for the compound interest is usually mentioned. For example, they would say that
- a certain amount of money has its interest compounded at 5% annually,
- a certain amount of money has its interest compounded at 7% every 3 months,
- a certain amount of money has its interest compounded at 2% every 6 months,
In each of the examples given above, the compounding period is 1 year, 3 months and 6 months respectively.
If one is now asked to calculate the compound interst on a particular amount of money after time, T, we usually express this time T in terms of the number of time periods, t, that exist inside the given time T.
Hence, the time T is expressed in terms of time period t, as
T = nt
Such that the number of compounding periods in T is given as
n = (T/t)
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