Compound interest is a great thing when you are earning it! Compound interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned.

To calculate compound interest use the formula below. In the formula, *A* represents the final amount in the account after t years compounded 'n' times at interest rate 'r' with starting amount 'p'.

**Practice Problems**

**Note:** since the duration of time is half of a year, the value of *t* in the is ½

*t*in the compound interest formula is measured in years

Further Reading