Interest Calculator
Calculate both simple and compound interest with flexible compounding periods. Perfect for investment and savings calculations.
Simple vs Compound Interest
Compare simple and compound interest calculations. Compound interest earns interest on previously earned interest, potentially leading to higher returns.
Compounding Frequency
Choose from different compounding periods: annually, semi-annually, quarterly, monthly, or daily. More frequent compounding typically results in higher returns.
Investment Growth
See how your investment grows over time with detailed breakdowns of principal and earned interest.
Understanding Interest Calculations
Simple Interest vs. Compound Interest
Simple interest is calculated only on the initial principal, while compound interest is calculated on the principal plus accumulated interest. Over time, this difference can result in significantly different returns, especially for long-term investments.
Simple Interest Formula
I = P × r × t
Where:
- I = Interest earned
- P = Principal (initial investment)
- r = Annual interest rate (as a decimal)
- t = Time period in years
Example: $1,000 invested at 5% for 3 years
I = $1,000 × 0.05 × 3 = $150
Total = $1,000 + $150 = $1,150
Compound Interest Formula
A = P(1 + r/n)^(n×t)
Where:
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (as a decimal)
- n = Number of times compounded per year
- t = Time period in years
Example: $1,000 invested at 5% compounded monthly for 3 years
A = $1,000 (1 + 0.05/12)^(12×3) = $1,161.47
Interest = $1,161.47 - $1,000 = $161.47
Impact of Compounding Frequency
The more frequently interest is compounded, the more interest is earned. This is because interest is calculated on a smaller time interval, allowing previously earned interest to start generating additional interest sooner.
| Compounding Frequency | Final Value* | Interest Earned |
|---|---|---|
| Annually | $1,157.63 | $157.63 |
| Semi-annually | $1,159.27 | $159.27 |
| Quarterly | $1,160.10 | $160.10 |
| Monthly | $1,161.47 | $161.47 |
| Daily | $1,161.83 | $161.83 |
| * For $1,000 invested at 5% for 3 years | ||