Compound Interest Calculator Guide
Calculate compound interest for any principal, rate, and time period — with monthly, quarterly, and annual compounding.
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Compound Interest Calculator Guide Compound interest is the mechanism by which money grows on itself. Put ₹1,00,000 in a fixed deposit at 7% compounded quarterly for 10 years, and you withdraw ₹2,00,160 — not ₹1,70,000 as simple interest would suggest. The extra ₹30,160 is interest on interest. --- See our Complete Guide to Financial Calculators What Is Compound Interest? Compound interest adds each period's interest back to the principal, making the next period's interest calculation larger. This feedback loop is what Albert Einstein allegedly called "the eighth wonder of the world." The core formula: Where: A = Final amount (principal + interest) P = Principal (starting amount) r = Annual interest rate (as a decimal, so 7% = 0.07) n = Number of compounding periods per year t = Time in…
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only applies to the original principal), compound interest grows exponentially — each period's interest becomes part of the principal for the next period.
How is compound interest different from simple interest?
Simple interest uses the formula I = P × r × t, applying the rate only to the original principal. Compound interest uses A = P(1 + r/n)^(nt), applying the rate to a growing balance. On ₹1,00,000 at 10% for 5 years, simple interest earns ₹50,000 while annual compounding earns ₹61,051 — a difference of ₹11,051.
What is the compound interest formula?
The standard formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate as a decimal, n is the number of times interest compounds per year, and t is time in years. The interest earned is A minus P.
How often does compound interest compound?
Compounding frequency varies by product: savings accounts typically compound daily or monthly, fixed deposits compound quarterly or annually, bonds compound semi-annually. More frequent compounding produces slightly higher returns — daily compounding on ₹1 lakh at 7% for 1 year yields ₹7,250 vs ₹7,000 for annual compounding.
How do I use a compound interest calculator?
Enter the principal amount (initial deposit or investment), annual interest rate, compounding frequency (daily/monthly/quarterly/annual), and time period in years. The calculator returns the final amount and total interest earned. For FD calculations, use quarterly compounding; for savings accounts, use monthly or daily.
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