The 8th Wonder of the World
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Over long periods of time, it creates an exponential growth curve.
The Formula
A = P (1 + r/n)^(nt)
- A: Future Value of the investment/loan.
- P: Principal investment amount.
- r: Annual interest rate (decimal).
- n: Number of times interest is compounded per year.
- t: Time the money is invested or borrowed for, in years.