Amount = Principal * (1 + rate)^years = 1000 * (1 + 0.05)^3 = 1000 * 1.157625 = 1157.625

Fri, 01 May 2026 02:39:53 +0000

Understanding Compound Interest: How Principal Grows Over Time When it comes to saving and investing, one of the most important mathematical concepts you’ll encounter is compound interest. The formula Amount = Principal × (1 + rate)^years serves as the foundation for understanding how your money grows over time. Whether you’re saving for retirement, a major purchase, or simply building wealth, this formula helps clarify how interest compounds and transforms your principal. ### The Formula Explained At its core, the compound interest formula is: