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Arithmetic

Compound Interest

Formula
A = P × (1 + R/100)^T

What is Compound Interest?

Compound interest calculates the total amount when interest is reinvested each period. The final amount includes the principal plus all accumulated interest.

Variables

  • A
    A — Final amount (principal + interest)
  • P
    P — Principal amount
  • R
    R — Annual interest rate (in %)
  • T
    T — Time period (in years)

Worked Examples

Example 1

Find the compound amount on $1000 at 10% per year for 2 years.

Solution:

A = 1000 × (1 + 10/100)² = 1000 × 1.21 = $1,210

Frequently Asked Questions

Related Formulas

Percentage Change

((New Value − Original Value) / Original Value) × 100

Simple Interest

I = (P × R × T) / 100

Speed, Distance, Time

Speed = Distance / Time

Percentage of a Number

Result = (Percentage / 100) × Number

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