An easy way to think about compound interest is interest building on interest. It’s the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. The compound interest formula is P (1 + r/n)^(nt)
, where P
is the initial principal balance, r
is the interest rate, n
is the number of times interest is compounded per time period and t
is the number of time periods.