Compound Interest

Compound interest is a concept in finance and economics that refers to earning interest not only on the initial principal amount but also on the accumulated interest from previous periods. In simple terms, interest is calculated based on the initial principal and the accumulated interest of prior periods.

Compound Interest Calculator

Calculator

enter your initial investment amount
the yearly interest rate in a percentage
the number of years of years you plan to keep your investment
the number of times the investment is compounded in a year

Result

the total, the initial investment plus the interest
the accumulated interest you earned

The formula for compound interest can be expressed as:

A=Px(1+nr)nt

Where:

A is the future value, including interest.
P is the principal investment amount (the initial amount of money).
r is the annual nominal interest rate.
n is the number of times that interest is compounded per year.
t is the time the money is invested in in years.

In this formula:

represents the number of compounding periods over the investment's duration.
is the nominal interest rate per compounding period.

Compound interest is widely used in banking, investment, and financial calculations. It allows investments and loans to grow or accumulate over time, as interest is continuously added to the principal amount. As a result, compound interest often leads to exponential growth or exponential debt accumulation over time.

Compound Interest