# Concept of Compound Interest

When interest is calculated for every period on the total previous amount, then the total amount of interest gained on all the periods is called compound interest.

Let Principal = P

Rate of interest = r

No. of years = *n*

After 1st year, interest

After 1st year, amount

Now the principal becomes,

Principal

After 2nd year, interest

After 2nd year, Amount

and so on.

The amount after n-years is

Hence