Compound Interest Calculator
Calculate final amount from principal, annual rate, and time in years (compound interest).
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Principal
Annual rate %
Years
Result
Final amount:
Interest earned:
About Compound Interest Calculator
This compound interest calculator estimates the final balance and interest earned from an initial amount, annual rate and time period.
Compound Interest Formula
// Compound interest calculation
function calculateCompoundInterest(principal, rate, years) {
const r = rate / 100; // Convert percentage to decimal
const amount = principal * Math.pow(1 + r, years);
const interest = amount - principal;
return { amount, interest };
}
// Example: $10,000 at 5% for 10 years
// A = 10000 × (1.05)^10 = $16,288.95
// Interest earned = $6,288.95
Growth Example: $10,000 at Different Rates
| Years | 3% Rate | 5% Rate | 7% Rate | 10% Rate |
|---|---|---|---|---|
| 5 years | $11,593 | $12,763 | $14,026 | $16,105 |
| 10 years | $13,439 | $16,289 | $19,672 | $25,937 |
| 20 years | $18,061 | $26,533 | $38,697 | $67,275 |
| 30 years | $24,273 | $43,219 | $76,123 | $174,494 |
Key Insights
- Time is your friend: The longer money compounds, the faster it grows. Most growth happens in later years.
- Rate matters: Small differences in interest rate create large gaps over decades.
- Start early: Investing $100/month starting at age 25 beats $200/month starting at 35 (at 7% return).
- The Rule of 72: Divide 72 by your rate to estimate doubling time (e.g., 72/8 = 9 years at 8%).
Frequently Asked Questions
- What is the compound interest formula?
- The compound interest formula is A = P(1 + r)^t, where A is the final amount, P is the principal (initial investment), r is the annual interest rate (as a decimal), and t is the time in years. This formula calculates interest earned on both the initial principal and accumulated interest from previous periods.
- What is the difference between simple and compound interest?
- Simple interest is calculated only on the principal amount (I = P × r × t). Compound interest is calculated on the principal plus all previously earned interest. For example, $1000 at 5% for 10 years yields $500 simple interest vs $628.89 compound interest—a significant difference over time.
- How does compound frequency affect returns?
- More frequent compounding produces higher returns. Annual compounding adds interest once per year, monthly compounding 12 times per year, and daily compounding 365 times. The formula A = P(1 + r/n)^(nt) accounts for compounding frequency n. Continuous compounding uses A = Pe^(rt) for the maximum possible growth.
- What is the Rule of 72?
- The Rule of 72 estimates how long it takes to double your money at a given interest rate. Divide 72 by the annual rate to get the approximate years needed. For example, at 8% return, your investment doubles in about 9 years (72/8 = 9). This rule works well for rates between 6% and 10%.