Compound Interest Calculator

How Compound Interest Works

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It's the fundamental concept behind wealth creation through investing.

Compound Interest Formula

A = P × (1 + r/n)^n×t

Where:
A = Final amount
P = Principal (initial investment)
r = Annual interest rate (in decimal)
n = Number of compounding periods per year
t = Time in years

Compound Interest = A - P

Simple Interest vs Compound Interest

Simple Interest: Calculated only on the principal. Growth is linear. SI = P × R × T / 100

Compound Interest: Calculated on principal + accumulated interest. Growth is exponential.

For ₹1,00,000 at 8% for 10 years: SI = ₹80,000 vs CI = ₹1,15,892 (with annual compounding)

The Power of Compounding

Starting early matters more than investing more. ₹5,000/month from age 25 beats ₹15,000/month from age 35.

Rule of 72: Divide 72 by your interest rate to find how many years it takes to double your money. At 8%, money doubles in ~9 years.

More frequent compounding gives higher returns, though the difference is marginal for most practical purposes.

Frequently Asked Questions

What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (only on principal), compound interest grows exponentially — often called the "8th wonder of the world."

What is the compound interest formula?

A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate in decimal, n is compounding periods per year, and t is time in years. Compound Interest = A - P.

How does compounding frequency affect returns?

More frequent compounding gives slightly higher returns. Monthly compounding yields more than yearly. For ₹1 lakh at 8% for 5 years: Annual = ₹1,46,933, Monthly = ₹1,48,985 — a difference of about ₹2,000.

What is the difference between simple and compound interest?

Simple interest is calculated only on principal (linear growth). Compound interest is on principal plus accumulated interest (exponential growth). Over 10+ years, the difference becomes dramatic.

What is compound interest?

Compound interest is interest earned on both the principal and previously earned interest: A = P × (1 + r/n)^nt, where n is how many times a year interest compounds.

The compounding frequency matters: ₹1,00,000 at 10% for 10 years grows to about ₹2,59,374 compounded annually, but roughly ₹2,70,704 compounded monthly. SnoopTool lets you change frequency and see the gap.