What is Compound Interest?
Compound interest is often called the "eighth wonder of the world". Unlike simple interest, where you earn interest only on your principal amount, compound interest allows you to earn interest on interest.
The Formula Used
Our calculator uses the standard compound interest formula:
A = P(1 + r/n)nt
- A: Final Amount
- P: Principal Investment
- r: Annual Interest Rate (decimal)
- n: Number of times interest applied per time period
- t: Number of time periods elapsed
Why use this calculator?
Whether you are planning for retirement, saving for a child's education, or just looking to grow your wealth, understanding how different compounding frequencies (monthly, quarterly, yearly) affect your returns is crucial. A higher frequency usually results in higher returns over the long term.