Which of the following formulas correctly represents the calculation for compound interest?*I = (P×r×t)/100I=P×r×tA=P(1+r)^tI=P×(1+rt)

Question

Which of the following formulas correctly represents the calculation for compound interest?

I = (P × r × t) / 100
I = P × r × t
A = P(1 + r)^t
I = P × (1 + rt)

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Solution

The correct formula for compound interest is A=P(1+r)^t.

Here's a step-by-step breakdown of the formula:

A is the amount of money accumulated after n years, including interest.
P is the principal amount (the initial amount of money).
r is the annual interest rate (in decimal).
t is the time the money is invested for, in years.

So, you start with your principal amount, P, and then add the interest each year, which is a percentage, r, of the amount of money you have, P. This is done t times for t years. The (1+r) is raised to the power of t to account for each year.

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Which of the following formulas correctly represents the calculation for compound interest?*I = (P×r×t)/100I=P×r×tA=P(1+r)^tI=P×(1+rt)

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