What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, compound interest grows exponentially over time, which is why it is often called 'the eighth wonder of the world'.
The formula is: A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of times interest compounds per year, and t is the time in years. The more frequently interest compounds, the greater the final amount.
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