Compound interest is the amount of interest calculated on the initial principal amount, as well as on the accumulated interest from previous periods. It is calculated based on the compound interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. For example, if $1000 is invested at an annual interest rate of 5% compounded annually for 3 years: A = 1000(1 + 0.05/1)^(1*3) = $1157.63. So, the compound interest after 3 years would be $1157.63. View Solution Guide

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