When you invest wisely, compound interest helps your money grow over time. On the other hand, debt with a compound interest can become a financial burden if not managed well.
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Compound interest is when you earn interest on your initial amount (principal) and the already added interest. This means your money grows faster over time because each interest calculation is based on an increasing total. The longer you leave it, the more your investment grows.
A simple compound interest calculator works by following these steps:
The formula to calculate compound interest is:
A = P(1 + r/n)nt
Where:
To find the compound interest, subtract the principal from the final amount:
Compound Interest = A - P
This formula helps you calculate how much your investment will grow over time, considering the effect of compounding.
The formula to calculate simple interest is:
Simple Interest (SI) = P × R × T
Where:
This formula calculates the interest based on a straightforward multiplication of the principal, rate, and time.
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