Economics
Compound Interest Formula
Quick fact
Money invested at 10% annual compound interest doubles in about 7 years!
Why this is interesting
Did you know that a small amount of money can grow into a large sum over time just by sitting in a bank account? It's called compound interest, and it works like magic.
Read the full explanation
Understanding Compound Interest Formula
Compound interest is when the interest earned on your money is reinvested, so you earn interest on both the original amount and the accumulated interest. This means your money grows faster over time compared to simple interest.
A deeper explanation
The compound interest formula, A = P(1 + r/n)^(nt), calculates the total amount (A) after time t, where P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years. This exponential growth highlights why starting early with investments can lead to significant long-term gains.