Personal Finance Calculators > Compound Interest Calculator

# Compound Interest Calculator

Use this calculator to determine the worth of your investment after some years if you earned a fixed rate of return on it.

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Compound Interest Calculator FAQ:
 What is compound interest? Compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. The act of declaring interest to be principal is called compounding (i.e. interest is compounded). A loan, for example, may have its interest compounded every month: in this case, a loan with Rs. 100 principal and 1% interest per month would have a balance of Rs. 101 at the end of the first month. Calculator You will be interested inFD CalculatorHDFC FD CalculatorSBI FD CalculatorICICI FD CalculatorAxis Bank FD CalculatorPNB FD CalculatorPost Office FD Calculator
• The effect of compounding depends on the frequency with which interest is compounded and the periodic interest rate which is applied. Therefore, in order to define accurately the amount to be paid under a legal contract with interest, the frequency of compounding (yearly, half-yearly, quarterly, monthly, daily, etc.) and the interest rate must be specified. Since most people prefer to think of rates as a yearly percentage, most financial institutions disclose a (notionally) comparable yearly interest rate on deposits or advances.
• Compound interest may be contrasted with simple interest, where interest is not added to the principal (there is no compounding).

Some useful terminology
Nominal annual interest rate: This is the annual rate, unadjusted for compounding. For example, 12% annual nominal interest compounded monthly has a periodic (monthly) rate of 1%. Financial institutions will usually quote this rate along with the compounding period, when they offer you a loan or a fixed deposit. Effective annual rate: This is obtai ned by restating the nominal rate to reflect the effective rate as if annual compounding were applied. This is the real rate of interest you are paying (in the case of a loan), or earning (in the case of a fixed deposit).

Formula for calculating compound interest

Where,
P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years A = amount after time t.
An example: An amount of Rs. 10,000 is deposited in a bank paying an annual interest rate of 6.5%, compounded monthly.
Find the balance after 8 years. Answer. Using the formula above, with P = 10,000, r = 6.5/100 = 0.065, n = 12, and t = 8: So, the balance after 8 years is approximately Rs. 16,797.
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