Compound interest is a concept in finance where the interest on a loan or deposit accumulates over time, not only on the initial principal amount but also on the previously accumulated interest. This means that, with compound interest, the interest is added to the principal, and the new total amount then earns interest, creating a snowball effect of growth. The formula for compound interest can be expressed as: � = � ( 1 + � � ) � � A=P(1+ n r ​ ) nt Where: � A is the future value of the investment/loan, including interest. � P is the principal investment amount (the initial deposit or loan amount). � r is the annual interest rate (as a decimal). � n is the number of times that interest is compounded per unit � t (usually per year). � t is the time the money is invested or borrowed for, in years.