Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, your money grows exponentially over time.

The formula is A = P(1 + r/n)^(nt), where P = principal, r = annual rate (decimal), n = compounding frequency per year, t = time in years, and A = maturity amount.

More frequent compounding yields higher returns. Monthly compounding gives better returns than quarterly or yearly. However, the difference is marginal for small amounts or short periods.

The effective annual rate (EAR) is the actual annual return after accounting for compounding. For example, 8% compounded monthly has an effective rate of about 8.30%.

The Rule of 72 estimates how long it takes to double your money. Divide 72 by the annual interest rate. At 8%, your money doubles in approximately 9 years (72 ÷ 8 = 9).