Formula
This calculator uses the standard compound interest calculator formula:
Frequently Asked Questions
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It grows faster than simple interest over time.
A = P × (1 + r/n)^(n×t), where P = principal, r = annual rate (decimal), n = compounds per year, t = years.
Using annual compounding: A = 10,000 × (1.07)^10 = $19,671.51. Total interest earned = $9,671.51.
The Rule of 72 estimates how long it takes to double an investment: divide 72 by the annual interest rate. At 8%, money doubles in approximately 9 years.
More frequent compounding means slightly higher returns. Monthly compounding yields more than annual compounding at the same stated interest rate.
APR (Annual Percentage Rate) is the stated rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding and reflects actual annual return.