Calculate compound interest with options for regular deposits, compounding frequency, tax rate, and inflation.
How to Calculate Compound Interest
Compound interest accrues on both the principal and accumulated interest: A = P(1 + r/n)^(nt)
- P: Principal amount
- r: Annual interest rate (decimal)
- n: Compounding periods per year
- t: Time in years
How it Works & Formula
Calculates compound interest where P is principal, r is the annual rate, n is compounding frequency per year, and t is time in years.
Practical Examples
Investing $5,000 at 5% interest compounded daily for 5 years yields $6,420.13, which is higher than monthly or annual compounding.
Frequently Asked Questions
Interest calculated on the initial principal and also on the accumulated interest of previous periods ("interest on interest").
A = P(1 + r/n)^(nt), where P is principal, r is annual rate (decimal), n is compounding frequency per year, and t is time in years.
The more frequently interest compounds, the faster the balance grows. Daily compounding gives slightly more returns than monthly, which gives more than annual compounding for the same stated rate.
EAR is the actual annual interest rate accounting for compounding within the year. It is higher than the nominal rate when compounding occurs more than once a year. EAR = (1 + r/n)^n - 1.
APR is a flat annual rate (used mainly for loans) that may not reflect compounding. Compound interest reflects the true cost or return when interest is reinvested. For the same stated rate, compound interest grows faster.