Compound Interest Calculator

Frequently asked questions

What is compound interest?

Compound interest is “interest on interest.” Each period the earned interest is added to your principal, so the next period’s interest is calculated on a larger base. Over long horizons the effect is dramatic—$10,000 at 5% grows to $16,289 in 10 years with compound interest versus only $15,000 with simple interest. The Rule of 72 offers a quick mental shortcut: divide 72 by the rate to estimate doubling time.

What is the compound interest formula?

FV = PV × (1 + r/n)^(n×t), where PV is the present value, r is the annual nominal rate, n is the number of compounding periods per year, and t is the number of years. When you add regular deposits, an annuity factor extends the formula. This calculator handles both ordinary annuity (end-of-period) and annuity due (beginning-of-period) contributions.

What is the difference between simple and compound interest?

Simple interest pays a flat amount each period based on the original principal only. Compound interest reinvests earnings, so growth accelerates. For example, $10,000 at 5% for 10 years earns $5,000 in simple interest but approximately $6,289 when compounded monthly. The "Simple vs compound" widget above this section shows this gap for your inputs.

When is compound interest used?

Savings accounts, CDs, money-market funds, and bonds all use compound interest. Mortgages and auto loans also compound—in that case compounding works against the borrower. Understanding how compounding frequency (daily, monthly, quarterly) affects the effective yield (APY) helps you compare financial products on equal terms.

What is the Rule of 72?

A shortcut to estimate how long it takes to double your money: divide 72 by your annual interest rate. At 6%, money doubles in roughly 12 years. Try our Rule of 72 Calculator for exact comparisons.

How much interest will I earn on $10,000?

At 4.5% compounded monthly with no deposits: 1 year → ~$10,459; 3 years → ~$11,438; 5 years → ~$12,508; 10 years → ~$15,648. Adding regular deposits increases these totals significantly.

How much compound interest on $50,000 for 10 years?

At 4.5% compounded monthly, $50,000 grows to approximately $78,240 without additional deposits. With $200 monthly contributions the total reaches roughly $108,500.

What is APY vs APR?

APR is the nominal annual rate before compounding. APY (Annual Percentage Yield) accounts for compounding: APY = (1 + r/n)^n − 1. A 4.5% APR compounded monthly equals approximately 4.59% APY.

How often should interest compound?

Banks often compound daily or monthly. More frequent compounding slightly increases effective yield. The calculator lets you compare frequencies side by side to see the difference.