In the simplest terms its interest on interest. To understand the compound interest we need to do its Mathematical calculation. The A in the formula is the amount youll end up with.
Putting these variables into the compound interest formula would show.
Includes compound interest formulas to find principal interest rates or final investment value including continuous compounding A Pert. I p x 1 rt - p In that formula p is the principal amount r is the interest rate and t is the number of accrual or compounding periods in a year. Compound interest is the product of the initial principal amount by one plus the annual interest rate raised to the number of compounded periods minus one. Simple interest is the interest generated only from the principal.