Compound Interest Calculator

Compound interest, also known as 'interest on interest,' refers to the concept of adding accumulated interest back onto your principal balance, with additional interest calculations on both the original payment and the already-accrued interest. The frequency determines the rate at which compounding interest occurs; the more frequent the compound interest , the greater this same compound interest.

For instance , if you earn 10% annual interest, at ₹100 deposit will earn you ₹10 after a year. One will earn interest on your deposit as well as interest on the interest you have already earned. You can easily calculate compound interest using online interest rate calculator.

Compound Interest

Compound interest is a method of calculating interest that is paid on both the principal amount and the interest that has already accrued. This means that the interest you earn each year is added to the principal amount, and then interest is calculated on the new, larger principal amount.

The formula for compound interest is:

A = P(1 + r)^t

where,

• A is the amount of money after the interest has been compounded.
• P is the principal amount.
• r is the interest rate.
• t is the time period in years.

For example, if you invest \$100 at an interest rate of 5% per year and leave it invested for 2 years, you will have \$110.25 at the end of the 2 years. This is because the interest earned in the first year is added to the principal amount, and then interest is calculated on the new, larger principal amount in the second year.

How does a Simple Compound Interest Calculator work?

When you make a prudent investment, compound interest possesses the potential to build your wealth gradually. Contrariwise, if your debts are subject to compound interest, they can lead to financial strain unless properly managed.

To understand the mechanics of compound interest, let's deconstruct how your investment can experience compounding more comprehensively.

• The process of compound interest commences when your investment starts accruing interest. The interest earned gets added to the initial investment sum at this juncture. Subsequently, when it accumulates interest again, it calculates the newly acquired interest based on the initial principal invested and the earned interest.

• As the size of your investment continues to expand, it accumulates interest on the cumulative investment amount.

• This cycle perpetuates, allowing the investment to burgeon substantially without necessitating additional invested capital. As time progresses, this cycle bears the potential for considerable growth of the original investment.