Compound Interest Calculator
See a lump sum and regular additions grow with interest on interest, compounded yearly, quarterly, monthly, daily or continuously.
Updated · By Niraj Kumar
https://checkpre.com/finance/compound-interest-calculator
How is compound interest calculated?
Compound interest adds each period's interest to the balance, so later interest is earned on earlier interest as well. The balance after t years is A = P × (1 + r/n)^(n·t), where n is the number of compounding periods a year. ₹1,00,000 at 8% compounded quarterly for 10 years grows to ₹2,20,804.
Each period, interest is added to the balance and then earns interest itself. The more often that happens, the higher the effective yearly rate, though the gains shrink quickly: continuous compounding, the limit, is P × e^(r·t). Monthly additions are grown the same way from the month they go in.
A = P × (1 + r/n)^(n·t)- P
- Starting amount
- r
- Annual interest rate as a decimal
- n
- Compounding periods a year: 1, 2, 4, 12 or 365
- t
- Years
Worked example
₹1,00,000 at 8% a year, compounded quarterly, left for 10 years.
- 1Rate per quarter: 8% ÷ 4 = 2%
- 2Quarters: 10 × 4 = 40
- 3Growth: 1.02⁴⁰ = 2.20804
- 4Effective yearly rate: 1.02⁴ − 1 = 8.243%
The deposit grows to ₹2,20,804, of which ₹1,20,804 is interest.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount, so ₹1 lakh at 8% earns ₹8,000 every year. Compound interest is also paid on interest already earned, so the yearly amount keeps rising. Over 10 years that is ₹80,000 simple against ₹1,20,804 compounded quarterly.
How long does it take to double my money?
Divide 72 by the interest rate. At 8%, money doubles in about 9 years; at 12%, about 6. The calculator shows the exact figure, which the rule of 72 approximates well between about 6% and 10%.
Does compounding frequency matter much?
Less than people expect. At 8%, going from yearly to quarterly compounding lifts the effective rate from 8% to 8.24%. Going from monthly to daily adds only about 0.03% more. The rate and the time invested matter far more.
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