calculateCompoundInterest()

Step 1: Understand the Compound Interest Formula

Before we start writing the code, it's useful to understand the formula for compound interest. The formula is A = P (1 + r/n) ^ (nt), where:

• A is the amount of money accumulated after n years, including interest.
• P is the principal amount (the initial amount of money).
• r is the annual interest rate (in decimal form).
• n is the number of times that interest is compounded per year.
• t is the number of years the money is invested for.

Step 2: Define the Function and Parameters

Next, we need to define a function in javascript that holds the formula for compound interest. Let's call this function calculateCompoundInterest. It will take four parameters: P, r, n, and t.

function calculateCompoundInterest(P, r, n, t) {

}

Step 3: Implement the Formula

Inside the function, implement the compound interest formula. We can use the built-in Math.pow() function in javascript to calculate the power of a number.

function calculateCompoundInterest(P, r, n, t) {
   return P * Math.pow((1 + r / n), n * t);
}

Step 4: Return the Result

As seen above, the function calculates the compound interest and returns the result. The result should be the final amount of money that will be accumulated after t years based on the initial principal amount, the annual interest rate, and the number of times the interest is compounded per year.

Step 5: Test the Function

Finally, let's test the function. For instance, if we have an initial amount of $1000 (P), an annual interest rate of 5% (r), and the interest is compounded annually (n=1) for 1 year (t), the function should return $1050.

console.log(calculateCompoundInterest(1000, 0.05, 1, 1));  // Outputs: 1050

Conclusion

We have successfully created a function in Javascript to calculate compound interest. It accords with the mathematical formula, utilizes in-built JS methods, and returns accurate results.

Here is the full code implementation:

function calculateCompoundInterest(P, r, n, t) {
   return P * Math.pow((1 + r / n), n * t);
}

console.log(calculateCompoundInterest(1000, 0.05, 1, 1));  // Outputs: 1050