Compound Interest Calculator

Compound Interest is the interest calculated on the initial principal, which also includes all the accumulated interest from previous periods on a deposit or loan. It can be thought of as “interest on interest,” and will make a sum grow at a faster rate than simple interest.

Simple Interest is calculated only on the principal amount, whereas Compound Interest is calculated on the principal amount as well as the accumulated interest of previous periods. This results in Compound Interest growing at a faster rate than Simple Interest.

Compound Interest is calculated using the formula: \( A = P(1 + \frac{r}{n})^{nt} \) where \( P \) is the principal amount, \( r \) is the rate of interest, \( n \) is the compounding frequency, and \( t \) is the time period in years. The compound interest is then given by \( A - P \).

The compounding frequency determines how often the interest is added to the principal. The more frequent the compounding, the higher the compound interest will be. For example, interest compounded monthly will result in a higher amount than interest compounded annually.

While the Compound Interest Calculator provides an estimate based on the inputs provided, it's essential to understand the broader financial context. It's always recommended to consult with a financial advisor or expert before making any financial decisions.