If I have an investment, that is compounded at some rate ##r##, ##n## times per year, it can be written as a function as such:(adsbygoogle = window.adsbygoogle || []).push({});

$$A(t)=P\left(1+\frac{r}{n}\right)^{nt}$$

My question is in regards to the 1 here. I think I have a general idea of what it's for, but I can't really put it into correct words.

What it seems to be doing, is keeping the new compounded value above ##P##. Where if the 1 wasn't there, we would be getting a value less than ##P##. But this seems wishy washy and I'd like to put it into more definitive terms so that I can understand it better. Can anyone help me out with this?

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# B Question about Compound Interest Formula

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