Compound Interest Calculator
Compound Interest Calculator
Grow a lump sum, with optional monthly additions, at any compounding frequency — and see how much of the final amount is interest rather than money you put in.
Compound interest
$1,00,000 at 8% a year, compounded quarterly, for 10 years
Compound interest
- P
- the starting amount
- r
- the annual rate as a decimal
- m
- compounding periods per year
- t
- years. Monthly additions are grown at the equivalent monthly rate, (1 + r ÷ m)m ÷ 12 − 1, and added on. After tax, the same formulas run at r × (1 − tax); the real return is (1 + r(1 − tax) ÷ m)m ÷ (1 + inflation) − 1.
Worked example
$1,00,000 at 8% a year, compounded quarterly, for 10 years
r ÷ m = 0.08 ÷ 4 = 0.02; m × t = 40
1.0240 = 2.2080
A = 1,00,000 × 2.2080 = $2,20,804
Effective annual rate = 1.024 − 1 = 8.24%
8% a year on 1,00,000 for 10 years, by compounding
| Compounding | Final amount | Effective annual rate |
|---|---|---|
| Yearly | $2,15,892 | 8.00% |
| Half-yearly | $2,19,112 | 8.16% |
| Quarterly | $2,20,804 | 8.24% |
| Monthly | $2,21,964 | 8.30% |
| Daily | $2,22,535 | 8.33% |
Why time matters more than the rate
Compound interest earns interest on interest. In the first year it is barely different from simple interest; the gap opens later, because each year’s interest is calculated on a larger balance than the last. Doubling the time more than doubles the interest, which is why starting early matters more than finding a slightly higher rate.
Compounding frequency is the part people overestimate. The table shows 8% compounded yearly and daily ending within about 1% of each other over ten years. What matters when comparing deposits is the effective annual rate, which folds the frequency in and lets two offers be compared directly.
The headline is before tax and inflation, and both take a larger share than people expect. At 6% inflation an 8% deposit grows its purchasing power by only about 2% a year. Add tax and the margin can vanish: at 8% compounded quarterly, a reader whose marginal rate is 30% keeps 5.6% a year, and at 5% inflation that is a real return of 0.68% a year. $1,00,000 left for 10 years grows to $2,20,804 before tax, $1,74,389 after it, and $1,07,059 in today’s money. The page takes tax from the interest as it is credited, which is close to how tax deducted at source works on a deposit; your real tax depends on your country, slab and thresholds. The chart shows the value, what you put in, and the after-tax value in today’s money, year by year. For regular monthly investing into mutual funds, the SIP calculator uses the convention those funds are quoted in; to judge a result over a period, see the ROI calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
What is the compound interest formula?
A = P × (1 + r ÷ m)m × t. For 1,00,000 at 8% compounded quarterly for 10 years, A = 1,00,000 × 1.0240 = 2,20,804.
How often do fixed deposits compound?
Most Indian bank fixed deposits compound quarterly. Check your bank’s terms; the calculator lets you choose.
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is paid on the amount plus the interest already added, so it grows faster the longer the money stays in.
What is my real return after tax and inflation?
(1 + r × (1 − tax) ÷ m)m ÷ (1 + inflation) − 1. At 8% compounded quarterly, a 30% tax rate and 5% inflation it is 0.68% a year: the deposit barely stays ahead of prices. With no tax and 4% inflation it is 4.08%.
Related calculators
References
- U.S. Securities and Exchange Commission, Investor.gov. Compound Interest Calculator. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. The present value of an annuity, from which the level-payment loan formula follows.
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.