Enter the accumulated amount, interest rate per period, and the number of periods to determine the principal.

Reverese Interest Formula

The following formula is used to calculate the principal amount given the interest rate and accumulated amount.

P = A / (1 + r) ^n

  • Where P is the principal amount ($)
  • A is the accumulated amount ($)
  • r is the interest rate per period(decimal)
  • n is the number of periods

Reverse Interest Definition

A reverse interest is a process of calculating a principal amount on an investment or loan given the accumulated amount, interest rate per period, and a number of periods.

Example Problem

How to calculate a reverse interest?

First, determine the accumulated amount. For this problem, over a term of 5 years, the accumulated amount is found to be $400,000.00.

Next, determine the interest rate per period. This is found to be 5% per year. This will be converted to a decimal of .05 for calculations.

Next, determine the total number of periods. As mentioned above, this is a time period of 5 years.

Finally, calculate the principal amount using the reverse interest formula.

P = A / (1 + r) ^n

= 400,000/ (1+.05)^5

= $313,410.47