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Compound Interest Formula Compound interest is calculated by finding the total amount accumulated over a period of time, based on the initial principal, the rate of interest, and the frequency of compounding. Therefore, a more complete version of the compound interest formula is: A = P (1 + r / n) nt. When using the formula A = P (1 + r/n) nt, keep in mind that the interest can be compounded daily, quarterly, triannually, semi-annually, twelve times a year (monthly), etc... Example #2. Let us modify example #1 a little bit! Calculate compound interest on an investment, 401K or savings account with annual, quarterly, daily or continuous compounding. The calculator computes compound interest calculations and shows you the steps including the math. Compound interest refers to interest that is calculated on both the principal amount and the accumulated interest over a specified time period. Students can review the Compound Interest Formula for different time periods in this post. Check its definition, examples, sample questions and answers.
