The compound interest formula \( A = P(1 + r)^t \) calculates the total amount of money accumulated after a certain period of time, including interest.
Here's what each variable represents:
- \( A \): the amount of money accumulated after \( t \) years, including interest.
- \( P \): the principal amount (the initial amount of money).
- \( r \): the annual interest rate (in decimal form).
- \( t \): the time the money is invested or borrowed for, in years.
The result \( A \) will give you the total amount after interest is applied, which is the principal plus the interest earned over the specified time period. If you want to find just the interest earned, you would subtract the principal \( P \) from the amount \( A \).