What is the Compound Interest Formula?

The formula for calculating compound interest is:

Where the variables represent:

• A = the future value of the investment/loan, including interest
• P = the principal amount (the initial amount of money)
• r = the annual interest rate (as a decimal, so 5% = 0.05)
• n = the number of times that interest is compounded per year (e.g., 1 for annually, 4 for quarterly, 12 for monthly)
• t = the time, in years, the money is invested or borrowed for