You’ve explained the compound interest formula really well through questioning and answering yourself! Here are the key points you uncovered:
a) t represents time in years, as annual interest rates are the standard.
b) n represents the number of compounding periods per year, since interest isn’t always compounded annually.
c) n is both inside and outside the parentheses to cancel out – inside to divide the interest rate, outside to convert to an annual rate.
d) The interest rate r needs to be divided by n to represent a per-period rate when compounding isn’t annual.
e) The 1+ represents the 100% principal plus interest, compounding each period by applying interest to both prior interest and principal.
f) P is the original or principal amount invested.
g) A is the total amount accumulated after t years of compounding n times per year at rate r.
By walking through it step-by-step and answering your own questions, you’ve gained a strong understanding of how the formula mathematically describes compound interest growth over time. Excellent job of self-guided explanation and reasoning![responsivevoice_button voice="US English Male"]