Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods.
Compound interest allows investments to grow faster because interest is earned on previously accumulated interest.
A = P(1 + r)t
P = Principal, r = Interest Rate, t = Time
Principal = ₹10,000
Interest Rate = 10%
Time = 5 Years
A = 10000(1 + 0.10)5
A = 10000 × 1.61051
Future Value = ₹16105.10
Compound interest is interest calculated on both the principal and accumulated interest.
Compound interest allows investments to grow exponentially over time.