Compound interest refers to an interest calculation method in which in addition to the interest generated on the principal of a fund, in the next interest calculation period, the interest generated in previous interest calculation periods is also calculated as interest.

The calculation of compound interest is to calculate the principal and the interest generated together, which means that the interest is beneficial.

Extended information:

Calculation formula

The future value of compound interest means that after the principal earns interest within the agreed period, the interest is added to the principal and then the interest is calculated. , rolled over period by period to the sum of principal at the end of the agreed period. To put it simply, it means depositing A at the beginning of the period, taking i as the interest rate, and depositing the sum of principal and interest after n periods. Formula: F=A*(1 i)^n.

For example: the principal is 50,000 yuan, the interest rate or investment return rate is 3, and the investment period is 30 years, then, what will be obtained after 30 years Interest income, calculated according to the compound interest calculation formula, and the sum of principal and interest (terminal value) is: 50000×(1 3)^30

Since the inflation rate and interest rate are closely related, they are like the two sides of a coin. , therefore, the formula for calculating the future value of compound interest can also be used to calculate the actual value of a specific fund in different years. Simply replace the interest rate in the formula with the inflation rate.

Baidu Encyclopedia-Compound Interest