Simple interest does not, however, take into account the power of compounding, or interest-on-interest, where after the first year the 1% would actually be earned on the $101 balance—adding up ...

The formula for simple interest requires your initial principal balance, annual interest rate, and time in years. Say you put a sum of $800 into a savings vehicle with a 5% annual simple interest ...

Compound Interest Formula The formula for calculating the total amount paid on a loan with compound interest is: A = P (1 + r n) n t w h e r e: A = F i n a l a m o u n t P = I n i t i a l p r i n ...