How to calculate compound interest

Compound interest is a concept used in finance to calculate the growth of an investment or loan over time. It is the interest that is calculated on both the initial principal and the accumulated interest from previous periods. The formula for calculating compound interest is: A = P(1 + r/n)^(nt) Where: A = the amount of money accumulated after n years, including interest. P = the principal amount (initial investment or loan amount). r = the annual interest rate (in decimal). n = the number of times that interest is compounded per year. t = the time the money is invested or borrowed for (in years). To calculate compound interest, you would plug the values of P, r, n, and t into the formula, and then solve for A. For example, if you have an initial investment of $1000, with an annual interest rate of 5%, compounded quarterly over 5 years, the formula would look like this: A = 1000(1 + 0.05/4)^(4*5) A = 1000(1 + 0.0125)^(20) A = 1000(1.0125)^20 A = 1000(1.282) A = 1282 So, the amount of money accumulated after 5 years, including interest, would be $1282. When calculating compound interest, it's important to pay attention to the frequency of compounding (n) as this can significantly impact the final amount. The more frequently interest is compounded, the higher the final amount will be. Compound interest is a powerful concept in finance and can have a significant impact on the growth of investments or the cost of loans over time. It's important to understand how it works and how to calculate it in order to make informed financial decisions.