Compound interest意思

Compound interest is a method of calculating interest on an amount that takes into account both the principal amount and the accumulated interest from previous periods. This means that the interest is "compounded" or added to the principal, and then interest is calculated on the total amount for the next period.

In simple interest, the interest is calculated only on the principal amount for each period, and the interest is not added to the principal.

Compound interest can be calculated using different compounding periods, such as daily, monthly, quarterly, or annually. The more frequent the compounding periods, the higher the effective interest rate will be, because the interest is being added to the principal more often, which then earns interest itself.

The formula for calculating compound interest is:

A = P(1 + r/n)^(nt)

Where: A = the future value of the investment or loan, including interest P = the principal investment amount or loan amount r = the annual interest rate (decimal form) n = the number of compounding periods per year t = the number of years the money is invested or borrowed

For example, if you invest $1,000 at a 5% annual interest rate, compounded annually, after 5 years, you would have:

A = $1,000 (1 + 0.05)^5 A = $1,000 (1.05)^5 A = $1,000 * 1.2763 A = $1,276.30

So after 5 years, you would have $1,276.30.