Final answer:
The 'p' in the compound interest formula stands for the initial deposit, which is the foundational figure from which savings growth is calculated over time with the added effect of compound interest.
Step-by-step explanation:
The "p" in the compound interest formula represents the initial deposit made into a savings account. To demonstrate, let's consider a scenario where you start saving money early in life.
For example, if at age 25 you decide to save $3,000 at a 7% annual compound interest rate, by using the compound interest formula the initial deposit (represented by "p") will grow significantly over time.
The calculation would be 3,000(1+.07)40 = $44,923, showing how the power of compound interest can increase your savings over a period of 40 years. The value of "p" is crucial because it serves as the starting point for calculating how much your savings will grow.
In the compound interest formula, the letter "p" represents the annual percentage rate. The annual percentage rate (APR) is the rate at which interest is calculated and added to the initial deposit over a period of time. It determines the growth of funds in a savings account or investment.