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Compound Interest Formula and the Power of Time

Compound Interest Formula and the Power of Time

Compound interest: A = P × (1 + r/n)^(n×t). Time is the biggest lever due to exponential growth. Rule of 72: divide 72 by the rate to estimate doubling time.

The compound interest formula: A = P × (1 + r/n)^(n × t) Where: - A = final amount - P = principal (initial investment) - r = annual interest rate (as decimal) - n = compounding frequency per year - t = time in years The most important variable is time (t), which appears in the exponent. Time dramatically outperforms increases to the interest rate due to exponential growth. Doubling your investment period produces far greater returns than doubling the rate. Rule of 72: Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 8% annual return: 72 ÷ 8 = approximately 9 years to double.

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Finance

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90%

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April 04, 2026

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