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Compound interest calculates interest on both the initial principal and the previously accumulated interest. Unlike simple interest (which only grows on the principal), compound interest grows exponentially — your interest earns interest. Einstein reportedly called it "the eighth wonder of the world."
Trin-for-trin guide
- 1Start with your principal amount P
- 2Determine the annual rate r and how often it compounds (n times per year)
- 3Apply the formula: A = P(1 + r/n)^(nt)
- 4The difference A − P is the total interest earned
Løste eksempler
Input
$1,000 at 5% for 10 years (annual)
Resultat
$1,628.89
1000(1.05)¹⁰ — earned $628.89 interest
Input
$1,000 at 5% for 10 years (monthly)
Resultat
$1,647.01
Monthly compounding earns $18.12 more
Input
$5,000 at 7% for 20 years (annual)
Resultat
$19,348.42
Nearly 4× the initial investment
Input
$100/month for 30 years at 8%
Resultat
$149,035.94
Total invested: $36,000. Interest: $113,035
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