Compound Interest Calculator
Calculate compound interest with different compounding frequencies
Details
Enter details and click Calculate
Maturity Amount
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Principal
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Interest Earned
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How to Use
- Principal โ enter the initial investment amount.
- Rate of Interest โ enter the annual interest rate.
- Time Period โ enter the investment duration in years.
- Compounding Frequency โ choose daily, monthly, quarterly, half-yearly, or annually.
- View Results โ see final amount, compound interest earned, and comparison with simple interest.
What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the interest already accumulated. Unlike simple interest (which is calculated only on the principal), compound interest causes your money to grow exponentially โ the longer you invest, the faster it grows.
Compound Interest Formula
A = P ร (1 + r/n)^(nรt)
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (as decimal)
- n = Number of times interest is compounded per year
- t = Time in years
Compound Interest = A โ P
Simple Interest vs. Compound Interest
| Feature | Simple Interest | Compound Interest |
|---|---|---|
| Formula | P ร r ร t | P ร (1 + r/n)^(nt) โ P |
| Growth pattern | Linear | Exponential |
| Where used | Short-term loans | FDs, savings, mutual funds |
| โน1L at 8% for 10 years | โน80,000 interest | โน1,15,892 interest (quarterly) |
The Power of Compounding โ Why Frequency Matters
โน1,00,000 at 10% p.a. for 5 years:
- Simple interest: โน50,000
- Annually compounded: โน61,051
- Quarterly compounded: โน63,862
- Monthly compounded: โน64,534
- Daily compounded: โน64,816
The difference between annual and daily compounding may seem small (โน3,765 on โน1L), but over 20โ30 years on larger amounts, frequent compounding compounds the difference dramatically.
Einstein's "Eighth Wonder"
Compound interest is famously attributed to Einstein as the "eighth wonder of the world." The Rule of 72 gives an intuitive feel: divide 72 by the annual interest rate to get the approximate number of years needed to double your money. At 8%, money doubles in 72/8 = 9 years. At 12%, it doubles in 6 years.