Compound Interest – What It Is and How to Calculate It
Optimize your investments and learn how compound interest can work for you with our compound interest calculator.
Compound interest
6 416,79
Breakdown
| Year | Month | Interest | Accrued Interest | Balance |
|---|---|---|---|---|
| 1 | 1 | 20,83 | 20,83 | 5 020,83 |
| 1 | 2 | 20,92 | 41,75 | 5 041,75 |
| 1 | 3 | 21,01 | 62,76 | 5 062,76 |
| 1 | 4 | 21,09 | 83,86 | 5 083,86 |
| 1 | 5 | 21,18 | 105,04 | 5 105,04 |
| 1 | 6 | 21,27 | 126,31 | 5 126,31 |
| 1 | 7 | 21,36 | 147,67 | 5 147,67 |
| 1 | 8 | 21,45 | 169,12 | 5 169,12 |
| 1 | 9 | 21,54 | 190,66 | 5 190,66 |
| 1 | 10 | 21,63 | 212,28 | 5 212,28 |
| 1 | 11 | 21,72 | 234,00 | 5 234,00 |
| 1 | 12 | 21,81 | 255,81 | 5 255,81 |
| 2 | 1 | 21,90 | 277,71 | 5 277,71 |
| 2 | 2 | 21,99 | 299,70 | 5 299,70 |
| 2 | 3 | 22,08 | 321,78 | 5 321,78 |
| 2 | 4 | 22,17 | 343,96 | 5 343,96 |
| 2 | 5 | 22,27 | 366,22 | 5 366,22 |
| 2 | 6 | 22,36 | 388,58 | 5 388,58 |
| 2 | 7 | 22,45 | 411,03 | 5 411,03 |
| 2 | 8 | 22,55 | 433,58 | 5 433,58 |
| 2 | 9 | 22,64 | 456,22 | 5 456,22 |
| 2 | 10 | 22,73 | 478,95 | 5 478,95 |
| 2 | 11 | 22,83 | 501,78 | 5 501,78 |
| 2 | 12 | 22,92 | 524,71 | 5 524,71 |
| 3 | 1 | 23,02 | 547,73 | 5 547,73 |
| 3 | 2 | 23,12 | 570,84 | 5 570,84 |
| 3 | 3 | 23,21 | 594,05 | 5 594,05 |
| 3 | 4 | 23,31 | 617,36 | 5 617,36 |
| 3 | 5 | 23,41 | 640,77 | 5 640,77 |
| 3 | 6 | 23,50 | 664,27 | 5 664,27 |
| 3 | 7 | 23,60 | 687,87 | 5 687,87 |
| 3 | 8 | 23,70 | 711,57 | 5 711,57 |
| 3 | 9 | 23,80 | 735,37 | 5 735,37 |
| 3 | 10 | 23,90 | 759,27 | 5 759,27 |
| 3 | 11 | 24,00 | 783,26 | 5 783,26 |
| 3 | 12 | 24,10 | 807,36 | 5 807,36 |
| 4 | 1 | 24,20 | 831,56 | 5 831,56 |
| 4 | 2 | 24,30 | 855,86 | 5 855,86 |
| 4 | 3 | 24,40 | 880,26 | 5 880,26 |
| 4 | 4 | 24,50 | 904,76 | 5 904,76 |
| 4 | 5 | 24,60 | 929,36 | 5 929,36 |
| 4 | 6 | 24,71 | 954,07 | 5 954,07 |
| 4 | 7 | 24,81 | 978,87 | 5 978,87 |
| 4 | 8 | 24,91 | 1 003,79 | 6 003,79 |
| 4 | 9 | 25,02 | 1 028,80 | 6 028,80 |
| 4 | 10 | 25,12 | 1 053,92 | 6 053,92 |
| 4 | 11 | 25,22 | 1 079,15 | 6 079,15 |
| 4 | 12 | 25,33 | 1 104,48 | 6 104,48 |
| 5 | 1 | 25,44 | 1 129,91 | 6 129,91 |
| 5 | 2 | 25,54 | 1 155,45 | 6 155,45 |
| 5 | 3 | 25,65 | 1 181,10 | 6 181,10 |
| 5 | 4 | 25,75 | 1 206,86 | 6 206,86 |
| 5 | 5 | 25,86 | 1 232,72 | 6 232,72 |
| 5 | 6 | 25,97 | 1 258,69 | 6 258,69 |
| 5 | 7 | 26,08 | 1 284,77 | 6 284,77 |
| 5 | 8 | 26,19 | 1 310,95 | 6 310,95 |
| 5 | 9 | 26,30 | 1 337,25 | 6 337,25 |
| 5 | 10 | 26,41 | 1 363,65 | 6 363,65 |
| 5 | 11 | 26,52 | 1 390,17 | 6 390,17 |
| 5 | 12 | 26,63 | 1 416,79 | 6 416,79 |
What Is Compound Interest?
Compound interest is a process where interest is calculated not only on the initial capital but also on the accumulated interest. This leads to exponential growth of your investments or debts. Calculating compound interest can help you understand what the future of your savings or loans will look like.
Compound Interest Formula
The basic formula for calculating compound interest is:
A = P (1 + r / n) ^ (nt)
- A: the future value of the investment.
- P: the initial capital (principal).
- r: the annual interest rate.
- n: the number of compounding periods per year.
- t: the duration of the investment in years.
Compound Interest Calculation Example
If you invest 1000 $ at an annual interest rate of 5%, with yearly compounding, after 5 years you will have:
A = 1000 * (1 + 0.05) ^ 5 = 1276.28 $
This means you have earned 276.28 $ in interest alone, growing exponentially each year.
How Compound Interest Affects Your Savings
The more frequently interest is compounded, the faster your investment will grow. Use our Compound Interest Calculator to see how quickly your savings will grow.
Compound Interest Calculator
Use our Compound Interest Calculator to see how your investments will grow over time by entering the initial amount, interest rate, and compounding period.
Frequently Asked Questions about Compound Interest
1. What is the difference between simple and compound interest?
Simple interest is calculated only on the initial capital, while compound interest is calculated on both the principal and accumulated interest.
2. How does the compounding frequency affect compound interest?
The more frequently interest is compounded (monthly, quarterly, etc.), the faster your capital will grow.
3. Can I use compound interest to pay off loans?
Yes, compound interest can significantly increase the value of your debt if it’s not paid off in time. Review your loan terms to understand how interest is applied.