# Compound Interest Calculator

Enter values to calculate:

## What is Compound Interest?

• Compound interest is the addition of interest to the primary sum of deposit. It is the interest calculated on initial principal plus all the accumulated interest from previous periods on a deposit.
• In different words it is “interest on interest”.
• Interest can be compounded on any given frequency schedule, continuing from daily to annually.
• When calculating compound interest, the frequency of compounding durations makes a great difference. The more the number of compounding periods, the greater the compound interest.

## Compound interest calculation formula:

A = P (1 + r/n) (nt)

A = Final Amount (Principal + Interest)

P = Initial Principal Amount.

r = Rate of interest.

n = Number of compounding period per year.

= Number of years the amount is deposited/borrowed for.

Example:

An amount of \$1,000 is deposited in a bank paying an annual interest rate of 5%, compounded quarterly. What is the balance after 6 years?

Using the compound interest formula, we have that

P = 1000,

r = 5/100 = 0.05,

n = 4,

t = 6.

Here,

A = 1000  (1 + 0.05/4) (4 * 6)

A = 1000  (1 + 0.0125) (24)

A = 1000  (1.0125) (24)

A = 1000  (1.347)

A = 1347.35

So the balance after 6 years would be \$ 1347.35 in which interest earned would be \$347.35.

## Compounding period / frequency:

A compounding period/frequency is the span of time between when interest was last compounded and when it will be compounded again. For example, annual/yearly compounding means that a full year will pass before interest is compounded again.

Compounding period are as follows –

Annually / Yearly – (1/365)

Half Yearly – (2/365)

Quarterly – (4/365)

Monthly – (12/365)

Weekly. (52/365)

Daily. (365/365)