Compound Interest Calculator
Calculate compound interest with configurable principal, rate, compounding frequency, and time. See year-by-year growth breakdown and total interest earned.
Results
compounded monthlyFinal Amount
$20,096.61
Principal
$10,000.00
Total contributions
$10,000.00
Interest earned
$10,096.61
Effective APY
7.229%
Portfolio breakdown
50%
50%
ContributionsInterest
Year-by-Year Breakdown
| Year | Balance | Interest this year | Total interest |
|---|---|---|---|
| 1 | $10,722.90 | $722.90 | $722.90 |
| 2 | $11,498.06 | $775.16 | $1,498.06 |
| 3 | $12,329.26 | $831.20 | $2,329.26 |
| 4 | $13,220.54 | $891.28 | $3,220.54 |
| 5 | $14,176.25 | $955.71 | $4,176.25 |
| 6 | $15,201.06 | $1,024.80 | $5,201.06 |
| 7 | $16,299.94 | $1,098.89 | $6,299.94 |
| 8 | $17,478.26 | $1,178.32 | $7,478.26 |
| 9 | $18,741.77 | $1,263.51 | $8,741.77 |
| 10 | $20,096.61 | $1,354.84 | $10,096.61 |
How to Use Compound Interest Calculator
- 1Enter your principal amount, annual interest rate, and investment period.
- 2Choose compounding frequency: daily, monthly, quarterly, or annually.
- 3View total amount, total interest earned, and a year-by-year growth table.
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Frequently Asked Questions
What is compound interest and how does it differ from simple interest?▾
Simple interest: Interest = Principal × Rate × Time. The interest is always calculated on the original principal, never on accumulated interest. Compound interest: Interest is calculated on both the original principal AND previously earned interest — "interest on interest". Formula: A = P × (1 + r/n)^(n×t), where P = principal, r = annual rate (decimal), n = compounding frequency per year, t = time in years. Over long periods, compounding creates exponential growth — this is why Einstein allegedly called it "the eighth wonder of the world".
How does compounding frequency affect returns?▾
The more frequently interest compounds, the more you earn. Example with $10,000 at 5% for 10 years: Annually (n=1): $16,288.95. Monthly (n=12): $16,470.09. Daily (n=365): $16,486.65. Continuous: $16,487.21. The difference between monthly and daily is small, but annually vs monthly can be significant for large amounts or long periods. APY (Annual Percentage Yield) accounts for compounding; APR (Annual Percentage Rate) does not.
What is the Rule of 72?▾
The Rule of 72 is a quick mental math shortcut: divide 72 by the annual interest rate to estimate the number of years to double your investment. Example: at 6% annual return, 72 ÷ 6 = 12 years to double. At 9%, 72 ÷ 9 = 8 years. The formula is most accurate for rates between 6% and 10%. For more precision, use ln(2) ÷ ln(1 + r) = actual doubling time. The Rule of 72 also works in reverse: if prices double in 12 years, inflation is approximately 72 ÷ 12 = 6%.
What is APY vs APR?▾
APR (Annual Percentage Rate): The stated interest rate, not accounting for compounding within the year. APY (Annual Percentage Yield): The effective annual rate, accounting for compounding. APY formula: APY = (1 + APR/n)^n − 1. Example: 6% APR compounded monthly = (1 + 0.06/12)^12 − 1 ≈ 6.168% APY. Banks advertise savings account APY (higher number for deposits) and loan APR (lower number for borrowing). When comparing financial products, always compare APY to APY.
How does inflation affect compound interest calculations?▾
Nominal return is what you see; real return accounts for inflation. Real return ≈ Nominal rate − Inflation rate (Fisher approximation). Precise formula: Real rate = (1 + nominal) / (1 + inflation) − 1. Example: 7% return with 3% inflation → real return ≈ 3.88%. To calculate inflation-adjusted final value, use the real rate in the compound interest formula. Historically, US stocks have returned about 7% nominal, ~4% real. Savings accounts often return less than inflation, meaning the purchasing power of your money decreases.