Compound Interest

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What is Compound Interest?

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Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

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How is Compound Interest calculated?

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Compound Interest can be calculated using the formula A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years.

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What does 'compounded semi-annually' mean?

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Compounded semi-annually means that the interest is calculated and added to the principal twice a year.

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What does 'compounded quarterly' mean?

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Compounded quarterly means that the interest is calculated and added to the principal four times a year.

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What is the principal amount in a compound interest problem?

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The principal amount is the initial sum of money invested or loaned before interest.

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What does the variable 't' represent in the compound interest formula?

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In the compound interest formula, 't' represents the time the money is invested or borrowed for, measured in years.

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What does the variable 'r' represent in the compound interest formula?

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In the compound interest formula, 'r' represents the annual interest rate expressed as a decimal.

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What does the variable 'n' represent in the compound interest formula?

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In the compound interest formula, 'n' represents the number of times that interest is compounded per year.

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If Karla invests $1,000 at 6.75% compounded semi-annually, what is the formula to find her total amount after 15 years?

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A = 1000(1 + 0.0675/2)^(2*15) or A = 1000(1 + 0.03375)^(30).

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If Jay'den deposits $475 at 3.8% compounded annually, what does 15 represent in this context?

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In this context, 15 represents the time, t, in years.