Compound Interest Calculator
Free online compound interest calculator with regular deposits, multiple compounding frequencies, inflation adjustment, visual growth chart, and yearly accumulation table.
Positive values add deposits; negative values (e.g., -100) perform periodic withdrawals.
Yearly Accumulation Schedule
Detailed breakdown of balance, deposits, and interest accumulated each year.
| Year | Starting Balance | Annual Net Deposits | Interest Earned | Cumulative Interest | Ending Balance |
|---|---|---|---|---|---|
| 1 | $10,000.00 | +$1,200.00 | +$539.50 | $539.50 | $11,739.50 |
| 2 | $11,739.50 | +$1,200.00 | +$628.50 | $1,168.01 | $13,568.01 |
| 3 | $13,568.01 | +$1,200.00 | +$722.05 | $1,890.06 | $15,490.06 |
| 4 | $15,490.06 | +$1,200.00 | +$820.39 | $2,710.44 | $17,510.44 |
| 5 | $17,510.44 | +$1,200.00 | +$923.75 | $3,634.20 | $19,634.20 |
How Compound Interest Is Calculated: Formulas & Models
Explore the mathematical equations behind exponential compound growth, linear simple interest, effective annual rate (APY), and inflation-adjusted purchasing power.
Compound Interest with Periodic Cashflows
Calculates future wealth when earned interest is periodically reinvested, compounding on both initial principal and ongoing deposits or withdrawals.
Simple Interest Model
Calculates linear growth where interest is computed solely on the active principal and net deposits without reinvestment.
Effective Annual Rate (EAR / APY)
Standardizes the true annualized return across different compounding frequencies, reflecting the compounding bonus over nominal rate.
Real Value & Inflation Adjustment
Discounts the nominal future balance by the expected inflation rate over time to calculate real future purchasing power.
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Frequently Asked Questions (FAQ)
QHow is compound interest calculated?
Compound interest is calculated using the exponential formula A = P(1 + r/n)^(nt) plus regular periodic contributions, where P is initial principal, r is the annual nominal rate, n is compounding frequency per year, and t is investment duration in years. Earned interest is continuously added back to principal, generating compounded returns over time.
QWhat is the difference between compound interest and simple interest?
Simple interest is calculated solely on the original principal amount, resulting in steady linear growth. Compound interest calculates returns on both the initial deposit and accumulated returns from earlier periods, producing accelerating growth over time.
QWhat is the Rule of 72?
The Rule of 72 estimates the number of years required to double an investment at a fixed annual compound rate. Divide 72 by the annual interest percentage. For example, at an 8% annual return, 72 divided by 8 equals approximately 9 years to double.
QHow does compounding frequency impact investment returns?
The more frequently interest compounds (such as daily or monthly compared to annually), the faster principal accumulates because returns earn additional interest sooner. Higher frequencies raise the Annual Percentage Yield (APY), approaching continuous compounding as a mathematical upper limit.
QHow do regular periodic contributions accelerate wealth accumulation?
Regular monthly or annual contributions steadily expand the base capital earning interest. Ongoing additions and dividend reinvestment multiply total portfolio growth faster than relying on a single initial deposit.
QHow does inflation affect compound interest returns over time?
Inflation reduces the purchasing power of future cash flows, meaning nominal investment growth differs from real wealth gains. To measure real returns, adjust nominal growth by expected inflation using the Fisher formula: Real Rate = (1 + Nominal Rate) / (1 + Inflation Rate) - 1. Evaluating inflation-adjusted returns confirms whether savings outpace rising living costs.
Financial & Regulatory Disclaimer
Generated by enetko for informational purposes only. Figures are based on the values entered and do not constitute financial, tax, or legal advice.