Compound Interest Calculator

Compound interest is interest calculated on both the principal and the accumulated interest from previous periods. Also known as "interest on interest." It provides much higher returns than simple interest over the long term.

Compound interest formula: A = P x (1 + r/n)^(n x t). Where A is the future value, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years.

Monthly compounding is more advantageous than annual compounding because interest is added to the principal more frequently. The shorter the compounding period, the higher the effective return.

The effective (real) interest rate is the annual return rate including the compound interest effect. It differs from the nominal interest rate because it accounts for the number of compounding periods.