Compound Interest Guide

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

The formula for compound interest is:

A = P (1 + r/n)^(nt)

Where:

• A = the future value of the investment/loan, including interest
• P = the principal investment amount
• r = the annual interest rate (decimal)
• n = the number of times that interest is compounded per year
• t = the number of years the money is invested or borrowed for

Compound interest can significantly increase the growth of an investment over time, especially when interest is compounded frequently.