Compound Interest Calculator

What is Compound Interest?

Compound interest is the interest earned on both your original investment and the accumulated interest from previous periods. It's often called "interest on interest" and is the most powerful tool for wealth building over time.

Formula:A = P(1 + r/n)^(nt), where:

• A = Final amount
• P = Principal (initial investment)
• r = Annual interest rate (as decimal)
• n = Number of times interest compounds per year
• t = Time in years

Compounding Frequencies Explained

• Annually:Interest is calculated once a year. Common in long-term investments.
• Half-yearly:Interest calculated twice a year. Slightly better returns.
• Quarterly:Interest calculated four times yearly. Better compounding effect.
• Monthly:Interest calculated 12 times yearly. Most common for savings accounts and SIPs.
• Daily:Interest calculated 365 times yearly. Maximum practical compounding.
• Continuously:Theoretical maximum compounding. Formula: A = Pe^(rt)

The more frequently interest compounds, the more you earn!

Rule of 72

The Rule of 72 is a simple trick to estimate how long an investment takes to double. Divide 72 by your interest rate, and you get the approximate number of years:

Years to Double = 72 ÷ Interest Rate (%)

Example:If your investment earns 8% interest, it will approximately double in 72 ÷ 8 = 9 years.

Reverse:If you want money to double in 10 years, the required rate = 72 ÷ 10 = 7.2% p.a.

Frequently Asked Questions