What Is Compound Interest?
The video defines compound interest as interest on the interest you already earned, not just on what you put in.
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1.What is compound interest?
The video defines compound interest as interest on the interest you already earned, not just on what you put in.
2.What do P, r and n stand for in A = P x (1 + r)^n?
The video gives P as the start amount, r as the rate for one period in decimal form, and n as the number of periods.
3.In the worked example, what do 1,000 at 4 percent a year become after three years?
Year one adds 40, year two 41.60, year three about 43.26, so about 1,125, which matches 1,000 x 1.04^3.
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Sources (2)
- CFPB: What is an APR? (Ask CFPB)
- Eigene Berechnung (synthetisches Rechenbeispiel
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Education only. Not financial advice.