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Compound Interest Calculator

Simulate your investment growth

Calculate the final amount with compound interest and understand the formula, practical examples, comparisons, and limitations.

Recreational/Educational

  • Educational tool; not financial advice. Results are estimates.

Estimate the amount with compound capitalization. The calculator helps you compare investment scenarios and understand the effect of compounding frequency over time.

How it works

Each period, interest is added to the principal and becomes the base for the next calculation. This accelerates growth compared to simple interest, which accrues only on the initial principal.

Formula

A = P (1 + i)^n

Variables

  • A — final amount
  • P — initial principal
  • i — interest rate per period (% per month/year)
  • n — number of periods (months/years)

Notes

  • Converting annual to monthly (and vice versa) changes the result.
  • The effective rate depends on the compounding frequency.
  • Rounding may cause small differences.

Examples

  • $1,000 at 5% per year for 2 years

    principal: $1,000
    rate: 5% per year
    periods: 2
    compounding: yearly

    ≈ $1,102.50 (interest ≈ $102.50)

  • $5,000 at 0.8% per month for 12 months

    principal: $5,000
    rate: 0.8% per month
    periods: 12
    compounding: monthly

    ≈ $5,501.69 (approx.)

  • Comparing yearly vs. monthly compounding (same effective rate)

    principal: $2,000
    rate: 12% per year
    periods: 1
    compounding: yearly/monthly

    Monthly tends to yield a slightly higher amount.

    • Use an equivalent effective rate when comparing frequencies.

Comparisons

Simple vs. compound interest

With simple interest, returns accrue only on the initial principal. With compound interest, each period’s interest is added to the principal, generating “interest on interest.”

Nominal vs. effective rate

Nominal rate must be converted to an effective rate according to compounding frequency (monthly, yearly, etc.) to reflect actual gain.

Note on inflation/fees

Results do not consider inflation, taxes, or management fees; evaluate the real return after discounting these factors.

Limitations

  • Does not consider taxes, fees, or inflation.
  • Time-varying rates are not modeled.
  • Incorrect inputs or rounding may affect the result.

Privacy

Calculations are performed locally in your browser; no data is sent to or stored on our servers.

FAQ

  • What’s the difference between simple and compound interest?

    With compound interest, each period’s interest is added to the principal; with simple interest, it accrues only on the initial principal.

  • Can I include monthly contributions?

    This version doesn’t include periodic contributions. Compare scenarios by varying principal and periods.

  • How do I convert an annual rate to a monthly rate?

    Use equivalence: i_monthly = (1 + i_annual)^(1/12) − 1.

  • Why does my bank’s result differ?

    Differences in rounding, calendar conventions, and applied fees/charges.

References

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