How Compound Interest Works

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. The formula used is: A = P(1 + r/n)^(nt) + PMT * [((1 + r/n)^(nt) - 1) / (r/n)].

Where:
A = Future Value
P = Principal (Initial Investment)
r = Annual Interest Rate
n = Compounding Frequency
t = Time in Years
PMT = Monthly Contribution