Compound InterestATI TEAS 7 cheat sheet

Interest on interest

6 key facts Reviewed Oct 2026

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Simple Vs Compound

Simple — interest only on the principal
Compound — interest also earns interest

The Formula

A = P(1 + r/n)^(nt)
n = times compounded per year, t = years

Effect

More frequent compounding gives a larger final amount

Estimating

Compound always exceeds simple over the same period

Key takeaway

Interest on interest

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