26 - Compound Interest Formula & Exponential Growth of Money - Part 1 - Calculate Compound Interest

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In this lesson, you will learn what compound interest is and how to calculate compound interest. We will first discuss how interest works and how money earned and compounded can lead to an exponential growth of money. We then derive the compound interest formula using a practical example of annual compounding. Next we will extend the formula to handle cases when the compounding is done quarterly. Finally, we will solve problems involving saving money for retirement, investing, savings, debt, principal, and how saving a small amount of money over a long period of time can lead to fantastic growth of money.