Compound Interest Calculator
See the power of compounding on your investment.
Total Maturity Value
Principal Amount
Total Interest Earned
Year-by-Year Breakdown
| Year | Opening Balance | Interest | Closing Balance |
|---|
What is Compound Interest? (The "Magic")
Compound Interest is the "interest on interest." It occurs when the interest you earn on an investment is added back to your principal amount. From that point on, you earn interest on the *new, larger* principal.
[Image of compound interest graph vs simple interest]Albert Einstein reportedly called it the "8th wonder of the world." The longer you stay invested, the more powerful the compounding effect becomes.
The Compound Interest Formula
This calculator uses the standard formula to find the future value of your investment:
A = P (1 + r/n) ^ (nt)
A= Future Value (Maturity Amount)P= Principal Investmentr= Annual Interest Rate (decimal)n= Times compounded per yeart= Number of years
Compound vs. Simple Interest
Example: Invest ₹1,00,000 at 10% for 3 years.
Simple Interest
Interest is calculated only on the principal.
- Year 1: ₹10,000
- Year 2: ₹10,000
- Year 3: ₹10,000
Total: ₹1,30,000
Compound Interest
Interest is calculated on principal + past interest.
- Year 1: ₹10,000 (Total: 1.1L)
- Year 2: ₹11,000 (10% of 1.1L)
- Year 3: ₹12,100 (10% of 1.21L)
Total: ₹1,33,100
That extra ₹3,100 is the "magic." Over 20-30 years, this difference becomes massive.