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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What is the formula for Compound Interest?

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P stands for the principal amount, which is the initial amount of money deposited or borrowed.

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r represents the annual interest rate expressed as a decimal.

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t represents the time the money is invested or borrowed for, in years.

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How do you convert a percentage to a decimal?

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To convert a percentage to a decimal, divide the percentage by 100. For example, 4% becomes 0.04.

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Calculate the future value of an investment of $12,000 at an interest rate of 4.8% compounded annually after 7 years.

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The future value is $16,661.35.

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If you invest $5,000 at an interest rate of 4% compounded annually, what will be the value after 3 years?

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What is the difference between simple interest and compound interest?

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Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest.

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What is the future value of an investment of $5,000 at an interest rate of 3.75% compounded annually after 25 years?

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The future value is $12,550.80.