Compound Interest Calculator
Interest after 10 years
Total amount
$19,671.51
Total interest
$9,671.51
Initial amount
$10,000.00
ROI(Return on investment)
96.72%
Interest rate(yearly)
7%
Compound interval
yearly
Year
Interest
Accumulated interest
Total
1
$700.00
$700.00
$10,700.00
2
$749.00
$1,449.00
$11,449.00
3
$801.43
$2,250.43
$12,250.43
4
$857.53
$3,107.96
$13,107.96
5
$917.56
$4,025.52
$14,025.52
6
$981.79
$5,007.30
$15,007.30
7
$1,050.51
$6,057.81
$16,057.81
8
$1,124.05
$7,181.86
$17,181.86
9
$1,202.73
$8,384.59
$18,384.59
10
$1,286.92
$9,671.51
$19,671.51
Compound interest calculator
The compound interest calculator shows you how much your savings or investments have grown over time using compound interest. It also gives you how much interest you have gotten. Compound interest is interest accumulated from a principal sum and previously accumulated interest. It is the result of reinvesting or retaining interest. Essentially, it means earning "interest on interest," which leads to a faster growth rate compared to simple interest, which is only calculated on the principal amount.
Due to the nature of compounding, investments grow faster over time, which is beneficial for long-term savings and retirement plans. On the flip side, for borrowers, compound interest can lead to substantial debt accumulation if not managed properly. Understanding how to calculate and leverage compound interest allows individuals to make informed financial decisions, maximizing their wealth accumulation and minimizing their debt burdens.
How to calculate compound interest on your investment?
To calculate compound interest, you divide the annual interest rate by 100 divide it by the compound frequency and add one to it. Multiply this by the initial investment to the power of the interval multiplied by the years. Subtract the initial investment from it and you have the interest.
Interest = investment × (1 + (annual interest rate / 100) / interval)^(interval × years) - investment
How to estimate the future value of your investment?
To estimate the future value, you divide the annual interest rate by 100 divide it by the compound frequency and add one to it. Multiply this by the initial investment to the power of the interval multiplied by the years.
Future value = investment × (1 + (annual interest rate / 100) / interval)^(interval × years)
The rule of 72
The Rule of 72 is a simple way to estimate the number of years required to double the investment at a given annual rate of return.
Years to double = 72 / interest rate
Example: You want to know how long it will take to double an investment with a interest of 8% , the formula would look like this: 72 / 8 = 9 years. So if you have an interest rate of 8% it will take approximately 9 years to double your investment.
Applications of Compound Interest
- Savings Accounts: Banks use compound interest to grow savings, encouraging customers to save more.
- Retirement Accounts: Accounts like 401(k)s and IRAs benefit significantly from compound interest over the long term.
- Loans and Mortgages: Lenders apply compound interest to loans, affecting the total repayment amount.
- Credit Cards: Interest on unpaid credit card balances is compounded, leading to increased debt if not managed properly.
- Investments: Stocks, bonds, and mutual funds rely on the principles of compound interest for growth over time.
The risks and benefits of compound interest
- Wealth Accumulation: Over time, compound interest significantly increases the value of investments.
- Encourages Saving: The prospect of earning more interest motivates individuals to save and invest.
- Debt Risk: For borrowers, compound interest can lead to substantial debt if not managed properly.
- Market Risks: In investments, the returns from compound interest are subject to market volatility and risks.