Compound Interest Calculator
Model the exponential growth of compound interest on any principal amount, rate, and time horizon.
Results
The Compound Interest Calculator projects the total value of a deposit after applying compound interest over the specified term. The output displays the final balance, cumulative interest earned, and effective yield from the compounding effect.
Compound Interest Explained
Compound interest generates growth on both the original principal and previously accumulated interest. This compounding effect produces exponential growth that accelerates over longer time horizons.
The Mathematics of Compounding
The compound interest formula A = P(1 + r/n)nt contains 4 variables that determine the final balance. P (principal) is the starting deposit. The variable r (rate) is the annual interest rate expressed as a decimal. The variable n (compounding frequency) is the number of times interest is calculated per year. The variable t (time) is the investment duration in years. A $10,000 deposit at 5.00% APR compounded monthly (n=12) for 10 years produces a balance of $16,470.09.
Compound vs. Simple Interest
Simple interest uses the formula I = P × r × t and calculates interest only on the original principal. A $10,000 deposit at 5.00% for 10 years earns $5,000 in simple interest. The same deposit with compound interest (monthly) earns $6,470.09 — a difference of $1,470.09. This $1,470.09 represents the "interest on interest" generated by compounding.
The Power of Time
Compound interest growth accelerates over time because the growing balance generates proportionally larger interest payments each year. In year 1, a $10,000 deposit at 5% earns $500. In year 10, the balance has grown to approximately $16,289, generating $814 in interest that year alone. In year 20, the balance reaches approximately $26,533, generating $1,327 in annual interest — more than 2.5 times the first year's earnings.
Year-by-Year Growth Table
View how compound interest builds your balance year over year. Adjust the principal and rate to generate a custom growth schedule.
Growth Schedule
| Year | Balance | Interest | Total Interest |
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Applications of Compound Interest
Compound interest applies to 5 common financial products:
CDs
Fixed-rate compound growth
Savings
Variable-rate compounding
Bonds
Coupon reinvestment
401(k)
Tax-deferred compounding
IRA
Tax-advantaged growth
Calculate Compound Interest
Enter your deposit details above to project the compound growth of your investment over any time horizon.
Calculate GrowthFAQs
What is compound interest?
Compound interest is interest calculated on both the initial principal and the previously accumulated interest. It generates exponential growth over time because each interest payment increases the base for the next calculation.
What is the compound interest formula?
The compound interest formula is A = P(1 + r/n)nt. A is the final amount, P is the principal, r is the annual rate, n is the compounding frequency, and t is the time in years.
How does compounding frequency affect returns?
Higher compounding frequency increases returns because interest is added to the principal more often. Daily compounding yields more than monthly, which yields more than annual compounding.
What is the difference between compound and simple interest?
Compound interest calculates interest on the principal plus previously earned interest, while simple interest calculates interest only on the original principal. Compound interest produces higher total returns over the same period.
How long does it take for compound interest to show significant growth?
Compound interest shows significant growth after 5 to 10 years. The compounding effect accelerates over time because the growing balance generates proportionally larger interest payments each period.