How to use the compound interest calculator
- Enter the principal, the amount you start with.
- Enter the yearly interest rate.
- Set the time period in years or months.
- Choose how often interest is compounded, and add a monthly amount if you plan to add to it.
- Read the maturity amount, the effective rate and the comparison across compounding frequencies.
The compound interest formula
A = P × (1 + r ÷ n)n × t
P is the principal, r the yearly rate as a decimal, n how many times a year interest is compounded and t the time in years. A is the maturity amount, and the compound interest is A − P.
Worked example. ₹1,00,000 at 8% a year for 10 years, compounded quarterly: r ÷ n = 0.08 ÷ 4 = 0.02 and n × t = 4 × 10 = 40. So A = ₹1,00,000 × 1.0240 = ₹2,20,804, and the interest is ₹1,20,804. Simple interest at the same rate would be ₹80,000, so compounding adds ₹40,804. The effective yearly rate is 8.24%.
₹1,00,000 at 8% for 10 years, by compounding frequency
More frequent compounding adds a little each step, but the gain shrinks: daily is only a few rupees ahead of monthly.
| Compounding | Times a year | Effective rate | Interest | Maturity | More than yearly |
|---|---|---|---|---|---|
| Yearly | 1 | 8.00% | ₹1,15,892 | ₹2,15,892 | ₹0 |
| Half-yearly | 2 | 8.16% | ₹1,19,112 | ₹2,19,112 | ₹3,220 |
| Quarterly | 4 | 8.24% | ₹1,20,804 | ₹2,20,804 | ₹4,911 |
| Monthly | 12 | 8.30% | ₹1,21,964 | ₹2,21,964 | ₹6,072 |
| Daily | 365 | 8.33% | ₹1,22,535 | ₹2,22,535 | ₹6,642 |
Rule of 72: years to double your money
72 divided by the yearly rate gives a quick doubling time. It is close between about 6% and 10% and drifts further away at high rates. The exact figures below come from the compound interest formula.
| Rate a year | Rule of 72 | Exact, yearly | Exact, quarterly | Exact, monthly |
|---|---|---|---|---|
| 4% | 18.0 | 17.7 | 17.4 | 17.4 |
| 6% | 12.0 | 11.9 | 11.6 | 11.6 |
| 7% | 10.3 | 10.2 | 10.0 | 9.9 |
| 8% | 9.0 | 9.0 | 8.8 | 8.7 |
| 9% | 8.0 | 8.0 | 7.8 | 7.7 |
| 10% | 7.2 | 7.3 | 7.0 | 7.0 |
| 12% | 6.0 | 6.1 | 5.9 | 5.8 |
| 15% | 4.8 | 5.0 | 4.7 | 4.6 |
| 18% | 4.0 | 4.2 | 3.9 | 3.9 |
| 24% | 3.0 | 3.2 | 3.0 | 2.9 |
Simple vs compound interest on ₹1,00,000 at 8%
Compound interest here is compounded yearly. In the early years the two are close; over long periods interest on interest becomes most of the total.
| Period | Simple interest total | Compound interest total | Difference | Interest ratio |
|---|---|---|---|---|
| 5 years | ₹1,40,000 | ₹1,46,933 | ₹6,933 | 1.2× |
| 10 years | ₹1,80,000 | ₹2,15,892 | ₹35,892 | 1.4× |
| 20 years | ₹2,60,000 | ₹4,66,096 | ₹2,06,096 | 2.3× |
| 30 years | ₹3,40,000 | ₹10,06,266 | ₹6,66,266 | 3.8× |
For loans or deposits where interest is not added to the balance, see the simple interest calculator. For a bank deposit with TDS and tax on interest, use the FD calculator.
Frequently asked questions
What is the formula for compound interest?
A = P(1 + r/n)^(nt), where P is the principal, r the yearly rate as a decimal, n the number of times interest is compounded in a year and t the time in years. Compound interest is A − P. For ₹1,00,000 at 8% for 10 years compounded quarterly, A = ₹1,00,000 × (1 + 0.08 ÷ 4)^40 = ₹2,20,804.
How is quarterly compound interest calculated?
Divide the yearly rate by 4 and compound once every quarter. 8% a year becomes 2% a quarter, so ₹1,00,000 grows to ₹1,02,000 after the first quarter, and interest for the next quarter is worked out on that larger amount. Most banks compound cumulative fixed deposits quarterly.
What is the difference between simple and compound interest?
Simple interest is paid only on the principal; compound interest is also paid on interest already added. ₹1,00,000 at 8% for 10 years earns ₹80,000 as simple interest and ₹1,15,892 compounded yearly. Over 30 years the gap grows to ₹6,66,266.
Does monthly compounding give more than quarterly?
Yes, slightly. At 8%, quarterly compounding gives an effective 8.24% a year and monthly gives 8.30%. On ₹1,00,000 over 10 years the difference is ₹1,160. The rate itself matters far more than the frequency.
How long does it take for money to double with compound interest?
Divide 72 by the yearly rate for a quick estimate. At 8% that gives 9 years; the exact answer with yearly compounding is 9.0 years. The table on this page shows both for common rates.
How do I calculate compound interest for months instead of years?
Use the time in years as a fraction: 18 months is t = 1.5. Choose Months in the calculator to enter the period directly. For a period that is not a whole number of compounding periods, the calculator uses the same formula with a fractional power.