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compound interest

The formula for compound interest, A = the final value, P = the principal (original) amount, r = interest rate per period, n = the number of times per year that interest is compounded, and t = number of years, is A = P (1 + r/n)nt .

Example: In 3 years, how much money will $1000 be worth if put in a savings account compounded monthly at 2% interest? Answer: A = 1000 (1 + 0.02/12)(12)(3)≅ $1062.

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