A: The compound interest formula is useful when you want to find the future value of an amount at different points in time. This can help you figure out how much money something will be worth if invested for a year, five years and so on.

A: Compound interest is the process of earning income on and reinvesting a fixed amount of your original investment, thereby generating an incremental return. For example, if you invest $100 into a savings account that pays 5% interest per year, then after one year you will have earned $5 in addition to your initial investment. If at the end of three years this same principle was applied (with no additional deposits), then over those three years you would earn another 10%, for a total gain as follows:

A: The exponential growth of compound interest is an example of how it could work to your benefit, as you can see from this graph.

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