Simple interest formula

I = P × R × T

Where:

• P = Principal amount (initial investment or loan)
• R = Annual interest rate (in decimal, i.e. % ÷ 100)
• T = Time in years

Simple interest grows linearly with time and is always calculated on the original principal only.

Compound interest formula

A = P × (1 + r / n)^{n × t}

Where:

• A = Future value (principal + interest)
• P = Principal amount
• r = Annual interest rate (decimal)
• n = Number of compounding periods per year
• t = Time in years

Compound interest grows faster because interest is periodically added back to the balance and itself earns interest.

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