Use our compound interest calculator to determine how your investment will grow over time. Just input your initial investment, interest rate, and the number of years, and see the magic of compounding!
All calculations are based on standardized financial formulas for compound interest. For more details, visit the Investopedia Compound Interest Page. All calculations strictly adhere to these formulas and data.
The formula used for calculating compound interest is:
A = P \times (1 + \frac{r}{n})^{n \times t}
Where:
Suppose you invest $1,000 at an annual interest rate of 5% for 10 years with annual compounding. The calculation would be:
Step 1: Convert the percentage rate to a decimal: 5% = 0.05.
Step 2: Use the formula: A = 1000 × (1 + 0.05/1)^(1×10) = $1,628.89
This means after 10 years, your investment will grow to $1,628.89.
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.
Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on the principal plus any previously earned interest.
Compound interest allows your investments to grow at a faster rate compared to simple interest, as it takes into account accumulated interest over time.
The key factors include the principal amount, the interest rate, the frequency of compounding, and the time period.
Yes, in the case of loans and credit cards, compound interest can increase the amount owed significantly if not managed properly.