Compound Interest Calculator

Calculate how your investment grows with compound interest and compare different scenarios.

Compound Interest Calculator

This calculator is for informational purposes only. Results are estimates and may differ from actual values.

What Is Compound Interest?

Compound interest is when earned interest is added to the principal and the next period's interest is calculated on this total. This "interest on interest" effect provides exponentially growing returns over time.

Formula

A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]

P = Principal, r = Annual rate, n = Compounding frequency, t = Years, PMT = Periodic contribution

Impact of Compounding Frequency

The more frequently interest is compounded (daily > monthly > annual), the higher the effective return. However, the difference is usually small — the real impact comes from investment duration and regular contributions.

Info

With simple interest, interest is applied only to the original principal each period. With compound interest, earned interest is added to the principal and future interest is calculated on this total. Over the long term, compound interest provides much higher returns.

The more frequent the compounding, the higher the return. Daily compounding gives the highest, annual the lowest return. However, the difference is usually not very large — the real impact comes from investment duration and regular contributions.

The effective annual rate (EAR) is the actual annual return after accounting for compounding effects. If the nominal annual rate is 30% with monthly compounding, the EAR is 34.49% because interest earned each month also earns interest.