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