Question 1

What is compound interest?

Accepted Answer

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Question 2

What is the formula for compound interest?

Accepted Answer

The basic compound interest formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years.

Question 3

Why does compound interest matter?

Accepted Answer

Compound interest allows your savings or investment to grow exponentially over time, as you earn interest on your interest. The earlier you start investing, the more time compounding has to work its magic.