Compound interest is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. It is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. This calculator will help you estimate the future value of an investment or loan with compound interest.
Annually
Semi-annually
Quarterly
Monthly
Daily
How Compound Interest Works
Compound interest is a powerful concept in finance. Unlike simple interest, which is only calculated on the initial principal amount, compound interest is calculated on the principal amount plus the accumulated interest from previous periods. This means your money grows at an accelerating rate over time, often referred to as "interest on interest."
The Formula
The formula for compound interest is:
A = P (1 + r/n)^(nt)
Where:
A is the future value of the investment/loan, including interest
P is the principal investment amount (the initial deposit or loan amount)
r is the annual interest rate (as a decimal)
n is the number of times that interest is compounded per year
t is the number of years the money is invested or borrowed for
Key Factors Influencing Growth
Principal Amount: A larger initial investment will naturally result in a larger future value.
Interest Rate: Higher interest rates lead to faster growth. Even small differences in rates can have a significant impact over long periods.
Time: The longer your money is invested, the more time compound interest has to work its magic. This is why starting early is often recommended.
Compounding Frequency: More frequent compounding (e.g., daily vs. annually) generally leads to slightly higher returns, as interest is calculated and added to the principal more often.
Example Scenario
Let's say you invest $10,000 (P) at an annual interest rate of 7% (r=0.07), compounded monthly (n=12), for 20 years (t).
Using the formula:
A = 10000 * (1 + 0.07/12)^(12*20)
A = 10000 * (1 + 0.0058333)^(240)
A = 10000 * (1.0058333)^240
A = 10000 * 3.9997
A ≈ $39,997
After 20 years, your initial $10,000 investment would have grown to approximately $39,997 due to the power of compounding.
function calculateCompoundInterest() {
var principal = parseFloat(document.getElementById("principal").value);
var annualRate = parseFloat(document.getElementById("annualRate").value);
var years = parseFloat(document.getElementById("years").value);
var compoundingFrequency = parseInt(document.getElementById("compoundingFrequency").value);
var resultElement = document.getElementById("result");
resultElement.innerHTML = ""; // Clear previous results
if (isNaN(principal) || isNaN(annualRate) || isNaN(years) || isNaN(compoundingFrequency) ||
principal < 0 || annualRate < 0 || years < 0 || compoundingFrequency <= 0) {
resultElement.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var ratePerPeriod = annualRate / 100 / compoundingFrequency;
var numberOfPeriods = compoundingFrequency * years;
var futureValue = principal * Math.pow((1 + ratePerPeriod), numberOfPeriods);
// Format the result to two decimal places
var formattedFutureValue = futureValue.toFixed(2);
resultElement.innerHTML =
"Initial Principal: $" + principal.toFixed(2) + "" +
"Annual Interest Rate: " + annualRate + "%" +
"Compounded: " + getCompoundingFrequencyText(compoundingFrequency) + "" +
"Number of Years: " + years + "" +
"Estimated Future Value: $" + formattedFutureValue + "";
}
function getCompoundingFrequencyText(frequency) {
switch (frequency) {
case 1: return "Annually";
case 2: return "Semi-annually";
case 4: return "Quarterly";
case 12: return "Monthly";
case 365: return "Daily";
default: return frequency + " times per year";
}
}
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