Compound Interest Calculator Monkey

Compound Interest Formula:

\[ A = P \times (1 + R / n)^{n \times T} \]

Principal (P):

Annual Interest Rate (R):

Compounding Frequency (n):

Time (T):

years

Maturity Amount (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. It's often called "interest on interest" and makes a sum grow at a faster rate than simple interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + R / n)^{n \times T} \]

Where:

\( A \) — Maturity amount (future value)
\( P \) — Principal (initial investment)
\( R \) — Annual interest rate (in decimal form)
\( n \) — Compounding frequency per year
\( T \) — Time in years

Explanation: This formula calculates how much your investment will grow over time with compound interest, taking into account how frequently the interest is compounded.

3. Importance of Compound Interest

Details: Compound interest is a powerful financial concept that allows investments to grow exponentially over time. It's the foundation of long-term wealth building and retirement planning.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as a percentage), select compounding frequency, and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (daily vs annually) results in higher returns due to interest being calculated and added more often.

Q3: What is Moneychimp's method?
A: This calculator uses the standard compound interest formula as implemented by Moneychimp, a popular financial calculator website.

Q4: Can I use this for loans as well as investments?
A: Yes, the same formula applies to both savings/investments (where you earn interest) and loans (where you pay interest).

Q5: How accurate is this calculator?
A: This calculator provides accurate results based on the standard compound interest formula, assuming constant interest rates and regular compounding periods.