Compound Interest is NOT my Interest - 1512

I hate to seem like I whining about math, because I'm really not, but I just find so many ideas and concepts that I don't get, I don't like or I don't remember (or that I don't find useful!). Recently, I have been asked to calculate compound interest. Before that, it was simple interest, and it stays true to it's name - it's pretty simple.

Compound interest, on the other hand, takes me a long time to work out. I never seem to get the right answer the first time. It's because there are so many different variables to work with and things to plug in. It makes my mind go crazy! But...if I take it slow and double check my work, I can usually get it to come out right, now that I've gone over the things I will share with you below.

So, here's the formula for compound interest:

  A= P (1 + r/n) ^nt

where
    P = future value
    A= amount of initial deposit
    r = interest rate (expressed as a fraction: eg. 0.06)
    n = # of times per year interest is compounded
    t = number of years invested

Here is the formula explained and an example of how to work a problem using that formula: