Compound Interest Calculator
Results:
Total Amount: $0.00
Interest Earned: $0.00
Understanding Compound Interest: The Eighth Wonder of the World
Compound interest is a powerful financial concept that allows your investments to grow exponentially over time. Often referred to as “interest on interest,” compound interest can significantly boost your savings when given enough time to work. Our compound interest calculator helps you visualize this growth potential.
How Compound Interest Works
The compound interest formula is: A = P(1 + r/n)nt
- A = Final amount
- P = Principal investment
- r = Annual interest rate (decimal)
- n = Compounding frequency per year
- t = Time in years
Key Benefits of Compound Interest
- Exponential growth of investments
- Rewards long-term saving
- Helps beat inflation
- Works automatically through reinvestment
Frequently Asked Questions
1. What’s the difference between simple and compound interest?
Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.
2. How often should interest compound for maximum growth?
The more frequent the compounding (daily > monthly > quarterly > annually), the greater the returns.
Leave a Reply