What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, it grows exponentially, making it the key principle behind long-term wealth creation.

What is the compound interest formula?

A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is annual interest rate (decimal), n is compounding frequency per year, and t is time in years.

How often should interest compound for maximum growth?

More frequent compounding leads to slightly higher returns. Daily compounding yields slightly more than monthly, which yields more than annual. However, the difference diminishes at higher frequencies.

Investment Growth

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