Compounding

With a constant rate r per period and no intermediate withdrawals, future value equals present value × (1 + r)^n. Compound growth differs from simple interest because each period's return becomes part of the next period's base. Use an effective rate for the same interval as the periods counted, or convert the rate correctly. Compounding applies to investment balances, inflation and growth forecasts, but the assumed rate is a modelling input rather than a promise. Discounting performs the inverse calculation.