Compound Interest Calculator

Estimate your investment growth over time with compound interest

Table of Contents

How to Calculate Compound Interest

The compound interest formula used is: 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 is compounded per year
t = Time in years

By applying the formula above, you can determine how much your initial investment grows over different compounding periods.

Factors that Influence the Calculation

Initial capital: The higher the initial investment, the greater the growth potential.
Interest rate: Higher rates result in faster investment growth.
Investment time: The longer the money stays invested, the greater the compound interest effect.
Capitalization frequency: More frequent capitalizations (e.g., monthly vs. annual) can result in higher yields.
Regular contributions: If you add further contributions over time, your final amount can grow more substantially.

Practical Applications

Compound interest is fundamental in various financial areas:

Retirement planning
Long-term investments
Loan and financing calculations
Investment fund growth
Investment return analysis

Investment Tips

Start investing early to harness the power of compound interest
Reinvest earnings to maximize growth
Consider long-term investments
Diversify your investment portfolio
Make regular contributions to increase your capital

Frequently Asked Questions

What is the difference between simple and compound interest?

In simple interest, interest is calculated only on the initial capital. In compound interest, interest is calculated on both the initial capital and the interest accumulated in previous periods.

Why is compound interest considered the "eighth wonder of the world"?

This phrase, attributed to Albert Einstein, refers to the exponential growth potential of compound interest over time, which can seem "miraculous" due to its multiplication power.