What Is Compound Interest?
Compound interest is interest calculated on both the original principal and the interest that has already accumulated. The more frequently interest compounds — annually, quarterly, monthly or daily — the faster a balance grows, all else being equal.
Example Calculation
$100,000 invested at 7% annual interest, compounded quarterly, for 5 years grows to approximately $141,478, earning about $41,478 in interest.
Formula / Calculation Method
A = P × (1 + r/n)^(n×t), where P = principal, r = annual interest rate (decimal), n = compounding periods per year, and t = time in years.
How to Use This Tool
- Enter the principal amount you're investing.
- Enter the annual interest rate.
- Enter the time period in years.
- Choose how often interest compounds, then click Calculate.
Common Use Cases
Projecting savings account or fixed deposit growth
Comparing compounding frequencies
Understanding long-term investment growth
Setting realistic savings goals