Compound interest is a type of interest calculation that involves earning interest not only on the original principal amount but also on the accumulated interest from previous periods.
In other words, the interest earned in each period is added to the principal, and the subsequent interest calculation is based on the new, higher balance.
This interest is an important concept in finance and can have a significant impact on investment returns, debt management strategies, and long-term savings and investing goals.
The formula for calculating compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the future value or total amount including principal and interest
P = the principal or initial amount
r = the annual interest rate (expressed as a decimal)
n = the number of times interest is compounded per year
t = the number of years the interest is calculated for
