Compound Interest Calculator

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

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About Compound Interest Calculator

A compound interest calculator is a free tool designed to compute the future value of investments or savings when compound interest is applied. It's beneficial for individuals and businesses to understand the potential growth of investments over time. Also, it helps in financial planning and decision-making by providing insights into different factors.

Compound Interest Calculator - Daily, Monthly, Quarterly, Yearly

What is Compound Interest?

Money makes money, and the money that money makes, makes more money. Compound interest is the interest calculated on the initial principal of an investment that also includes all the accumulated interest from previous periods. In short, it's interest on interest and speeds up the growth of your investments.

Let's understand this term 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. So, you will earn $416 as interest and the new balance will be $10,816 at the end of the second year.

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 understand how the compound interest is calculated with an example.

Example:

Suppose you make an investment of $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

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

How to Use the Compound Interest Calculator?

  1. Firstly, select the type of currency in which you wish to make the calculations.
  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.

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 spends in a compound interest account, the more will be the benefits.
  • Most importantly, it's a good source of the 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.