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Compund Interest Calculator
Compound Interest Calculator
This is the amount you initially invest.
How often you’ll contribute additional funds.
The amount you contribute each period.
The total duration of the investment in years.
The yearly interest rate your investment earns.
How often interest is compounded.
Results
Total Amount Invested: $
Total Interest Earned: $
Total Value: $
About Compound Interest
Compound interest is the process where the interest earned on an investment is reinvested to earn more interest over time. The initial investment, along with the accumulated interest, earns more interest each period. This process can significantly grow your wealth over time.
For example, if you invest $1,000 at an interest rate of 5% compounded annually for 10 years, your investment would grow much faster than if the interest were not compounded.
Formula for Compound Interest
The compound interest formula is:
A = P(1 + r/n)nt
- A = The future value of the investment, including interest
- P = The initial investment amount
- r = The annual interest rate (in decimal form)
- n = The number of times the interest is compounded per year
- t = The number of years the investment is held
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. It allows investments to grow exponentially over time.
How does compounding frequency affect my returns?
The more frequently interest compounds, the faster your investment grows. For instance, monthly compounding generates more interest than annual compounding, since the interest is applied more frequently.
What is the best compounding frequency?
The best compounding frequency is typically the most frequent one available, such as daily or monthly. The more often your interest compounds, the greater your potential returns over time.
What’s the difference between simple and compound interest?
Simple interest is calculated only on the initial principal, while compound interest is calculated on both the initial principal and any accumulated interest, allowing your investment to grow faster over time.
How can I maximize the benefits of compound interest?
Maximize compound interest by starting early, investing regularly, and opting for a more frequent compounding period. The longer your investment is compounding, the more you benefit.
