Is my formula correct for working out compound interest?

[Jobo]

Hi,

I have written this formula and have been told it is incorrect for working out compound interest?

Interest Earned = Payment*(Interest Rate)/Period*(Time since payment made)

Ergo if i had a payment of £1000*2%/365*100 days = £5.00 interest?

Is this correct?

Thanks in advance.

 

[Giordano Bruno]

I would rather take the Principal * (annual interest rate + 1) raised to the power of the period - the Principal

In your case, this would be 1000*(102%)raised to the power of (100/365)-1000 = 5.44