| Principal or Start Amount (P) | |
| Annual Interest Rate (r) | % |
| Compound Frequency (n) | |
| Years of Growth (t) | |
| Payment (A) | |
| Payment Frequency (f) | |
| Future Value (F) | |
| Total Payments | (without principal) |
| Total Interest | |
How to use this Compound Interest Calculator?
- Enter the value of the principal or the start amount, annual compound interest rate, compound frequency, number of growth periods in years, payment amount and payment frequency.
- Press CALCULATE to calculate the value of future value, total payments and total compound interest.
- Click “CLEAR” to reset the entered values and start a new calculation. (You can also start a new calculation without pressing RESET).
- Press DEFAULT to fill in the blanks with the default setting.
What is Compound Interest (CI)?
The interest you earn on interest is known as compound interest. Here is a simple mathematical example to understand compound interest: If you have $100 and it earns 10% interest annually, you will have $110 at the end of the first year. You’ll have $121 at the end of the second year. We can break down this sum to make it easy to understand.
Here $121 = ($110 + $11) = ($100 + $10 + $11). The principal is $100. After one year, $10 is the interest earned at the end of the first year. So the total amount becomes $100 + $10 = $110. After two year, $11 is the interest earned from $110 at the end of the second year.
Unlike simple interest, compound interest is compounded, so an account holder earns interest on the principal and a borrower has to pay interest on the previously accumulated interest.
Compound Interest Calculation Formula
The formula for calculating compound interest is CI = P( 1 + r/100)t – P.
Here CI = Compound Interest, P = Principal, r = Annual Compound Interest Rate and t = total years of growth. The total amount at the end of the growth period is F = CI + P.
You can use the above compound interest calculator to calculate the total interest and total amount (future value) at the end of the period.
Compound interest calculation in case of different compounding and payment frequency
1. Compounding frequency
The compounding frequency or frequency of compounding refers to how frequently the accumulated interest is paid out or capitalized (added to the account) during the course of a year (or, less frequently, another unit of time). The compounding frequency could be annually (yearly), semi-annually (half-yearly), quarterly, bi-monthly, monthly, bi-weekly, weekly or daily.
What is the ideal compounding frequency?
Naturally, two compounding periods each year are preferable to one, and four compounding periods per year are preferable to two, since the more compounding periods throughout the course of this year, the higher the investment’s future worth will be.
2. Payment frequency
Payment frequency is the number of periods for which payment is made in a year. It determines how often you make your payments. The compounding frequency could be annually (yearly), semi-annually (half-yearly), quarterly, bi-monthly, monthly, bi-weekly, weekly or daily.
What is the ideal payment frequency?
The most common payment period is monthly payments typically on the 1st of every month. This is easy to remember.
You can use the above compound interest calculator to calculate the total compound interest and future value at the end of the period with multiple compounding and payment frequencies. The calculator works even if the compounding frequency and payment frequency are inconsistent.