Compound Interest Calculator
Calculate compound interest with different compounding frequencies. See year-by-year growth and understand the power of compounding.
Principal
₹1,00,000
Total Interest
₹46,933
Maturity Value
₹1,46,933
Growth Over Time
₹1,46,933
| Year | Principal | Interest |
|---|---|---|
| 1 | ₹1,00,000 | ₹8,000 |
| 2 | ₹1,00,000 | ₹16,640 |
| 3 | ₹1,00,000 | ₹25,971 |
| 4 | ₹1,00,000 | ₹36,049 |
| 5 | ₹1,00,000 | ₹46,933 |
| Year | Principal | Interest | Total Value |
|---|---|---|---|
| 1 | ₹1,00,000 | ₹8,000 | ₹1,08,000 |
| 2 | ₹1,00,000 | ₹16,640 | ₹1,16,640 |
| 3 | ₹1,00,000 | ₹25,971 | ₹1,25,971 |
| 4 | ₹1,00,000 | ₹36,049 | ₹1,36,049 |
| 5 | ₹1,00,000 | ₹46,933 | ₹1,46,933 |
What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Often called "interest on interest," it causes wealth to grow exponentially over time. Albert Einstein reportedly called compound interest the "eighth wonder of the world."
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
- A — Maturity amount (principal + interest)
- P — Principal (initial investment)
- r — Annual interest rate (as decimal)
- n — Number of times interest is compounded per year
- t — Number of years
Effect of Compounding Frequency
More frequent compounding leads to higher returns. For ₹1,00,000 at 10% for 5 years:
- Yearly: ₹1,61,051
- Half-Yearly: ₹1,62,890
- Quarterly: ₹1,63,862
- Monthly: ₹1,64,531
Banks typically compound quarterly for fixed deposits and monthly for savings accounts.
FAQ: How does compound interest differ from simple interest?
Simple interest is calculated only on the original principal, while compound interest is calculated on principal plus accumulated interest. Over long periods, compound interest generates significantly more wealth. For a 10-year investment at 8%, compound interest earns about 47% more than simple interest.
FAQ: What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate. For example, at 8% return, your money doubles in approximately 72/8 = 9 years. At 12%, it doubles in about 6 years.