 TITLE: What Is Compound Interest? CONTENT: How Do You Calculate Compound Interest?\n---------------------------------------\nTo calculate compound interest, you need to know a few things:\n2.  **What is the total principal that will earn interest?** In the scenario above, this is $100.\n3.  **What is your interest rate?** In the example above, the annual percentage rate is 5%.\n4.  **How often does your interest compound?** Compounding can happen once a month or once a year, and knowing how often it happens is key to calculating your compound interest. In the scenario above, it is once a year.\n5.  **How long will your interest be compounding?** This figure represents the number of months or years that you plan to allow interest to compound and grow. This time period may change, based on whether you adjust the term of your loan or whether you decide to hold an investment for a different length of time.\nOnce you have answers to all the questions above, you'll be able to calculate compound interest for your situation. You can follow the calculation model used above, but in situations where your interest compounds each month rather than annually, you'll have to adjust to account for that.\nHere is an example formula you can use to find out how much your interest will compound over a period of time with different compound rates:\nHere is what the components of this equation stand for:\n*   A = The amount of money you will have after a certain number of years\n*   P = How much you first invested or owed\n*   r = Interest rate expressed as a decimal\n*   n = The number of times your interest compounds each year\n*   t = The number of years the money grows\nWhile this formula may seem complicated, manually accounting for how often your interest compounds and how long it will accumulate would involve you stringing together many smaller equations to get the same answer. For a reliable compound interest calculator, check out this tool. END