Compound Interest Calculator – Calculate Investment Growth Instantly
Use this free compound interest calculator to see how your money grows over time. Enter principal, annual interest rate, time period and compounding frequency to get your total amount and interest earned instantly. No signup required.
What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the interest accumulated from previous periods. Unlike simple interest — which is calculated only on the principal — compound interest causes your money to grow exponentially over time. Albert Einstein reportedly called it the "eighth wonder of the world." The longer money compounds, the more powerful the effect becomes.
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
CI = A − P
Where:
- A = Final amount after interest
- P = Principal (initial investment)
- r = Annual interest rate (as decimal — e.g. 8% = 0.08)
- n = Number of times interest compounds per year
- t = Time in years
- CI = Compound interest earned (A – P)
Compounding Frequency Comparison
| Compounding | n value | ₹1,00,000 at 10% for 5 years |
|---|
| Annually | 1 | ₹1,61,051 |
| Semi-annually | 2 | ₹1,62,889 |
| Quarterly | 4 | ₹1,63,862 |
| Monthly | 12 | ₹1,64,531 |
| Daily | 365 | ₹1,64,866 |
Compound vs Simple Interest
| Feature | Simple Interest | Compound Interest |
|---|
| Calculated on | Principal only | Principal + accumulated interest |
| Growth pattern | Linear | Exponential |
| Used in | Short-term loans, FDs (some) | Savings, mutual funds, FDs (most) |
| Better for | Borrowers (pay less) | Investors (earn more) |
💡 The Rule of 72: Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 8% → 72 ÷ 8 = 9 years to double. At 12% → 6 years.
Frequently Asked Questions
Which investments use compound interest?Fixed deposits, recurring deposits, PPF, EPF, mutual funds, savings accounts with daily compounding — all use compound interest. Even home loans use a form of compound interest (reducing balance method).
How does compounding frequency affect returns?More frequent compounding = slightly higher returns. Monthly compounding earns more than annual compounding on the same principal and rate. Most bank FDs in India compound quarterly.
What is CAGR?CAGR (Compound Annual Growth Rate) represents the rate at which an investment grows year over year at a steady compound rate. It is the most accurate way to compare investment performance across different time periods.
Is compound interest good for loans?Compound interest benefits lenders/investors but increases the cost for borrowers. Personal loans and credit cards typically charge compound interest, which makes unpaid balances grow rapidly.