# Compound Interest Calculator

The compound interest calculator is used to estimate how much money can grow over time using the power of compounding.

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## How to Use the Compound Interest Calculator?

1. Firstly, select the currency type.
2. Enter the principal amount and investment time in days, weeks, months, quarters, and years.
3. Enter the annual interest rate and select the compounding frequency in terms of monthly, quarterly, or yearly.
4. Input the additional payment and time interval if needed. Also, choose whether the additional amount is to be added at the start or end of the compounding period.
5. After entering all the required values, press the 'Calculate' button.
6. As a result, the compound interest calculator will return future value, total deposited amount, total interest amount, and total yield. Also, it displays the final future value in a pie chart and future values by time in a bar graph. In addition, you can press the 'Compound Interest Table' button to see the yearly growth report with the balance amount.
7. Use the 'Reset' button to clear the input and output fields and start the new calculation.

### What is Compound Interest?

The compound interest is the interest you earn on both the money you initially invested in and the interest that has been added to it. So, it helps your money grow faster over time.

Let's understand it with an example.

• Let's say you have \$10,000 in your savings account that earns 4% annual interest. In a year, you will earn \$400 and the new balance will be \$10,400.
• In the second year, you will earn 4% on the balance at the end of the first year, which is \$10,400. At the end of the second year, you will earn \$416 as interest and the new balance will be \$10,816.

### Compound Interest Formula

A =  P( 1 +
 r n
)nt

Where,

A = Final amount (principal + interest earned)
P = Principal amount (present value)
r = Annual interest rate (in decimal)
n = Number of compounding periods per year
t = Total time (in years)

### How to Calculate the Compound Interest?

Let's take an example.

#### Example:

Suppose you invested \$5000 at the rate of 5% annual interest compounded monthly. Find out the future value after 10 years.

#### Solution:

Here,

P = \$5000
r = 5/100 = 0.05 (in decimal)
n = 12 (compounded monthly)
t = 10

Now put all the values in the compound interest formula.

A =  P( 1 +
 r n
)nt
=  5000( 1 +
 0.05 12
)(12 × 10)

= 5000 × (1.0041667)120

= 5000 × 1.647016

Future value (A) = \$8235.

Interest Earned = \$8235 - \$5000 = \$3235.

So, after 10 years, you will earn a total interest of \$3,235 and the final value will be \$8,235.

### FAQs

Simple interest is calculated on the principal amount only. While compound interest is calculated on the previous interest plus the principal amount. Also, in simple interest, the interest for each year is the same, unlike compound interest.

It's useful in various ways:

• It's free and easy to use.
• No manual calculation is required.
• You get multiple options for calculating compound interest.
• You can also include additional payments at the start or end of each compounding period.
• It gives instant and accurate results with yearly growth reports.
• It earns you interest on not just the money you saved but also the interest earned through that money.
• The more time your money is spent in a compound interest account, the more will be the benefits.
• Most importantly, it's a good source of a long-term cash management plan.

It means at what interval of time the interest will be accrued. For example, every month, every quarter, or annually.