How to use the Compound Interest Calculator
- Enter the principal, the yearly interest rate and the time period.
- Choose the compounding frequency.
- Compare compound and simple interest in the result.
Formula
A = P × (1 + r ÷ n)^(n × t)
Compound interest = A − P
- n:
- compounding periods per year (1, 2, 4 or 12)
Compound vs simple interest
Simple interest is paid only on the original amount. Compound interest is paid on the original amount plus the interest already added, so the balance grows faster each period. The more often interest compounds, the higher the effective yearly rate.
| Method | Maturity | Interest |
|---|---|---|
| Simple interest | ₹1,40,000 | ₹40,000 |
| Compounded yearly | ₹1,46,932.81 | ₹46,932.81 |
| Compounded quarterly | ₹1,48,594.74 | ₹48,594.74 |
Worked example
₹1,00,000 at 8% for 5 years, compounded quarterly
- A = 1,00,000 × (1 + 0.08 ÷ 4)^(4 × 5) = 1,00,000 × 1.02²⁰
₹1,48,594.74 (interest ₹48,594.74)
Frequently asked questions
What is the rule of 72?
A quick estimate of doubling time: divide 72 by the yearly rate. At 8%, money roughly doubles in 9 years.
Do banks compound interest quarterly?
Most Indian bank fixed deposits compound quarterly. Savings accounts usually calculate interest daily and credit it periodically. Check your bank's terms.