Compound Interest

Compound interest is the interest that is calculated on the original principal amount of a loan or deposit, as well as on the accumulated interest from previous periods. This means that the interest earned in one period is added to the principal and becomes part of the new principal for the next period, resulting in a higher overall interest earned over time.

Formula for Compound Interest

Compound Interest = Amount - Principal
Compound amount formula is given by:
A = P (1 + r/n)^(nt)
C.I. = P (1 + r/n)^(nt) – P

Where:

A is the final amount (principal + interest)
P is the initial principal or investment amount
r is the annual interest rate (expressed as a decimal)
n is the number of times interest is compounded per year
t is the number of years the investment is held

Interest Compounded for different years:

Some Very Important Formulas