function calculateCompoundInterest() {
// 1. Get Values
var principal = parseFloat(document.getElementById('ci_principal').value);
var monthly = parseFloat(document.getElementById('ci_monthly').value);
var rate = parseFloat(document.getElementById('ci_rate').value);
var years = parseFloat(document.getElementById('ci_years').value);
var frequency = parseInt(document.getElementById('ci_compound').value);
// 2. Validation
if (isNaN(principal)) principal = 0;
if (isNaN(monthly)) monthly = 0;
if (isNaN(rate)) rate = 0;
if (isNaN(years)) years = 0;
// 3. Calculation Logic
// We use an iterative loop to handle monthly contributions combined with variable compounding frequencies
// This ensures higher accuracy than simplified formulas when frequencies mismatch.
var totalMonths = years * 12;
var currentBalance = principal;
var totalPrincipal = principal;
var annualRateDecimal = rate / 100;
// Loop through every month of the investment
for (var i = 1; i Accrue Interest? Or Accrue -> Deposit?
// Standard calc: Principal starts. Month passes. Interest applied (if monthly). Deposit added.
// Step A: Calculate Interest for this month (if compounding happens this month)
// Frequency 12 = every month. Frequency 1 = every 12th month.
// Rate per compound period = rate / frequency
// To be precise:
// We need to accumulate "pending interest" if compounding hasn't hit yet.
// Actually, standard banks compound daily or monthly.
// If user selects "Annually", interest is calculated on the balance once a year.
// Simple iterative approach:
var monthInterest = 0;
// Add contribution
currentBalance += monthly;
totalPrincipal += monthly;
// Check if we compound this month
var isCompoundMonth = false;
if (frequency === 12) isCompoundMonth = true; // Monthly
if (frequency === 1 && i % 12 === 0) isCompoundMonth = true; // Annually
if (frequency === 4 && i % 3 === 0) isCompoundMonth = true; // Quarterly
if (frequency === 365) {
// Daily is complex in a monthly loop.
// Approx: Apply (1 + r/365)^(30)
currentBalance = currentBalance * Math.pow(1 + (annualRateDecimal/365), 30.416);
}
if (isCompoundMonth && frequency !== 365) {
// Apply interest
// Rate for this period
var periodRate = annualRateDecimal / frequency;
var interestAmount = (currentBalance – monthly) * periodRate; // Interest usually calculated on start balance
// Wait, if we just added monthly, do we earn interest on it immediately? Usually not until next period.
// Let's stick to standard formula logic: P * (1+r/n)
// Revert to formula for accuracy on lump sum, then formula for series.
// Iteration is prone to off-by-one errors in simplified JS.
// Let's use the robust formula method for the specific constraints.
}
}
// — ROBUST FORMULA METHOD —
// Future Value of Principal: P * (1 + r/n)^(nt)
var n = frequency;
var t = years;
var r = annualRateDecimal;
var fv_principal = principal * Math.pow((1 + r/n), (n*t));
// Future Value of Series (Monthly Deposits)
// Formula: PMT * ( ((1+r/n)^(nt) – 1) / (r/n) )
// Note: This formula assumes the deposit frequency MATCHES the compounding frequency.
// If they mismatch (e.g. Monthly Deposit, Annual Compound), we need an approximation or complex loop.
var fv_series = 0;
if (n === 12) {
// Monthly Compounding + Monthly Deposits = Match
fv_series = monthly * ( (Math.pow((1 + r/n), (n*t)) – 1) / (r/n) );
} else {
// Mismatch. Fallback to iterative loop for Series ONLY, keep Formula for Principal.
// Loop for deposits:
var balanceFromDeposits = 0;
for (var m = 1; m <= totalMonths; m++) {
balanceFromDeposits += monthly;
// Compounding check
if (n === 1 && m % 12 === 0) { // Annual
balanceFromDeposits *= (1 + r);
} else if (n === 4 && m % 3 === 0) { // Quarterly
balanceFromDeposits *= (1 + r/4);
} else if (n === 365) { // Daily
balanceFromDeposits *= Math.pow(1 + r/365, 30.41);
}
}
fv_series = balanceFromDeposits;
}
// Correction for Daily Compounding on Principal
if (n === 365) {
fv_principal = principal * Math.pow((1 + r/365), (365*t));
}
var totalBalance = fv_principal + fv_series;
var totalContributed = principal + (monthly * 12 * years);
var totalInterest = totalBalance – totalContributed;
// 4. Update UI
// Format Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2,
});
document.getElementById('ci_final_balance').innerText = formatter.format(totalBalance);
document.getElementById('ci_total_principal').innerText = formatter.format(totalContributed);
document.getElementById('ci_total_interest').innerText = formatter.format(totalInterest);
// Show results
document.getElementById('ci_results').style.display = 'block';
}
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world." Unlike simple interest, where you only earn money on your original principal, compound interest allows you to earn "interest on your interest." This compounding effect causes your wealth to grow exponentially over time rather than linearly, making it the most powerful tool for long-term investors.
How This Calculator Works
This Compound Interest Calculator helps you project the future value of your investments by accounting for specific financial variables:
Initial Investment: The lump sum of money you start with.
Monthly Contribution: Money you add to the investment regularly. Consistent contributions significantly boost the compounding effect.
Annual Interest Rate: The expected yearly return (ROI). The stock market historically averages around 7-10% (inflation-adjusted returns may vary).
Compounding Frequency: How often the interest is calculated and added back to your balance. The more frequent the compounding (e.g., Monthly vs. Annually), the higher the total return.
The Formula Behind the Math
The standard formula used to calculate the future value of a lump sum with compound interest is:
A = P(1 + r/n)nt
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per unit t
t = the time the money is invested or borrowed for, in years
Tips for Maximizing Your ROI
Start Early: Time is the most critical factor in compounding. A small investment made in your 20s can grow larger than a large investment made in your 40s due to the extra years of compounding.
Increase Frequency: If you have the choice between an account that compounds annually versus one that compounds monthly with the same rate, choose the monthly option to earn interest faster.
Reinvest Dividends: Ensure that any earnings generated by your investment are immediately reinvested to fuel the compounding cycle.