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Formula for Compound Interest
Using this formula, P represents the principal amount. This is the amount of the original mortgage, loan or investment. The annual nominal interest rate, r, is usually expressed as a decimal. The number of times the interest is calculated per year is expressed as the letter n. For most loans and mortgages, n is equal to twelve, because interest is usually calculated monthly. There are variations on this, however. Some mortgages are calculated weekly or annually, to enable either lower or higher rates. The letter t represents the number of years involved. This could include the number of years that the loan or investment is contracted for, or it could be used to calculate the amount of interest that would be calculated up until a certain date.
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