Compound Interest Calculator
Calculate how your investment grows with compound interest. See the power of compound interest over time.
Final Amount
$16,470.09
Interest Earned
$6,470.09
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Understanding Compound Interest
Compound interest is the interest earned on both your principal and previously earned interest. This creates exponential growth over time, making it one of the most powerful concepts in finance.
Compound Interest Formula
A = P(1 + r/n)^(nt)
- A = Final Amount
- P = Principal (initial investment)
- r = Annual interest rate (as decimal)
- n = Number of times compounded per year
- t = Time in years
Compounding Frequencies Explained
Annual
Interest calculated once per year
Quarterly
Interest calculated 4 times per year (better returns)
Monthly
Interest calculated 12 times per year (even better)
Daily
Interest calculated 365 times per year (best returns)
FAQ
How often should interest compound?
The more frequently interest compounds, the better. Daily compounding yields the highest returns, followed by monthly, quarterly, and annually.
What's the difference from simple interest?
Simple interest only earns on the principal, while compound interest earns on both principal and accumulated interest. Compound interest grows much faster.