Finance & Money · 复利 · Updated 2026-10-25
What Is Compound Interest?
Definition
Compound interest means each period’s interest is added to the principal for the next period’s calculation. Unlike simple interest, growth is exponential: FV = P(1+r)^n. Time is the most powerful variable — $100k at 6% grows to $179k in 10 years and $574k in 30 years.
Formula
FV = P × (1+r)^n
Worked Example
$100k at 6% compounded monthly for 30 years grows to $602,260 — interest is 5x the principal.
Common Misconception
"Compound interest always beats simple interest by a lot" - the gap is only significant over long horizons; within 1 year it is under 1% of the rate. Also a nominal 6% compounded monthly actually yields 6.17% annually - compare products on the same effective-annual basis.
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