Compound Interest Formula
The compound interest formula calculates the growth of a principal amount with compounding interest over time.
| Expression | Description |
|---|---|
| Accumulated amount. | |
| Principal amount. | |
| Rate of interest expressed as a decimal value. | |
| Frequency of investment per time period. | |
| Time elapsed. |
The compound interest formula calculates the growth of a principal amount with compounding interest over time. For example, given an interest rate of , a principal amount of , time elapsed of and a yearly investment strategy , the formula calculates the accumulated amount. This is shown below.
This example calculates the accumulated value of an investment given an interest rate of , a principal amount of , time elapsed of and a quarterly investment strategy . This is shown below.
Note, while the interest rate is , the interest rate applied for each quarter is only .
This example calculates the accumulated value of an investment given an interest rate of , a principal amount of , time elapsed of and a monthly investment strategy . This is shown below.