Compound Interest Calculator

Calculate your investment growth over time

Currency

Principal Amount

Annual Interest Rate (%)

Time Period (Years)

Compounding Frequency

Final Amount
$16,470.09

Total Interest Earned

$6,470.09

Principal Amount

$10,000.00

Year-by-Year Growth

Year	Interest Earned	Total Balance

How it Works

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

A = P(1 + r/n)^nt

A = Final Amount
P = Principal Amount (initial investment)
r = Annual interest rate (decimal)
n = Number of times interest is compounded per year
t = Time in years

Worked Examples

Example 1: Monthly Compounding

Investing $5,000 at 5% annual interest compounded monthly for 10 years:

P = $5,000, r = 0.05, n = 12, t = 10
A = 5000 * (1 + 0.05/12)^(12*10)
Final Amount = $8,235.05

Example 2: Annual Compounding

Investing $10,000 at 7% annual interest compounded annually for 5 years:

P = $10,000, r = 0.07, n = 1, t = 5
A = 10000 * (1 + 0.07/1)^(1*5)
Final Amount = $14,025.52

Example 3: Daily Compounding

Investing $1,000 at 10% annual interest compounded daily for 1 year:

P = $1,000, r = 0.10, n = 365, t = 1
A = 1000 * (1 + 0.10/365)^(365*1)
Final Amount = $1,105.16

Frequently Asked Questions

What is the difference between simple and compound interest?

Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal amount AND also on the accumulated interest of previous periods.

Which compounding frequency is best?

For investments, higher compounding frequency (like daily or monthly) yields higher returns because interest is added to your balance more often, allowing you to earn "interest on interest" faster.

What is the rule of 72?

The Rule of 72 is a quick mental math formula to estimate how long it takes to double your money. Divide 72 by the annual interest rate. For example, at 8% interest, money doubles in about 9 years (72/8).

Is compound interest taxed?

Yes, in most cases, interest earned is considered taxable income unless the investment is in a tax-advantaged account like a Roth IRA or 401(k).