Compounding is a technique of time value of money. To know the the future value of investment we use the technique of compounding. Compounding is a technique in which interest is charged on principal and interest earned. In compounding interest is charged with the aggregate value of pricipal and interest earned.
Compounding can be used in case of investment for single term and in the case of annuity too.
Future value in case of investment for single term = principal *(1+r)^n
Future value in case of investment for annuity = annuity*(1+r)^n-1 + annuity*(1+r)^n-2.........annuity*(1+r)^n-n
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