HomeSavings & investing
Compound interest calculator
Interest on interest: growth with yearly, quarterly or monthly compounding.
Quick answer
Compound interest is earned on the principal and on interest already added, so growth speeds up over time. Formula: A = P × (1 + r ÷ m)^(m × t). ₹1,00,000 at 10% for 5 years compounded yearly becomes ₹1,61,051.
Read the guide: How to calculate lumpsum investment returns
Amount after the period
₹1,61,051
- Principal
- ₹1,00,000
- Compound interest earned
- ₹61,051
- Simple interest would give
- ₹50,000
- Invested
- Gain
Year-by-year table
| Year | Invested so far | Gain so far | Balance |
|---|---|---|---|
| 1 | ₹1,00,000 | ₹10,000 | ₹1,10,000 |
| 2 | ₹1,00,000 | ₹21,000 | ₹1,21,000 |
| 3 | ₹1,00,000 | ₹33,100 | ₹1,33,100 |
| 4 | ₹1,00,000 | ₹46,410 | ₹1,46,410 |
| 5 | ₹1,00,000 | ₹61,051 | ₹1,61,051 |
How is compound interest calculated?
With compound interest, each period’s interest is added to the balance, so the next period earns interest on a bigger sum.
The more often interest compounds, the slightly more you earn; the bigger lever is time.
The last number compares with simple interest so you can see the extra that compounding adds.
What is the formula for compound interest?
- A = P × (1 + r ÷ m)^(m × t)
- P = principal, r = yearly rate ÷ 100, m = times compounded per year, t = years
Can you show a worked example of compound interest?
₹1,00,000 at 10% for 5 years compounded yearly: 1,00,000 × 1.10^5 = ₹1,61,051. Simple interest would give only ₹50,000.
How does compounding frequency change the result?
₹1,00,000 at 10% a year for 5 years. Simple interest would give ₹50,000.
| Compounded | Amount after 5 years | Interest earned |
|---|---|---|
| Yearly | ₹1,61,051 | ₹61,051 |
| Half-yearly | ₹1,62,889 | ₹62,889 |
| Quarterly | ₹1,63,862 | ₹63,862 |
| Monthly | ₹1,64,531 | ₹64,531 |
| Daily | ₹1,64,861 | ₹64,861 |
Common questions
What is the difference between simple and compound interest?
Simple interest is charged only on the original sum. Compound interest is charged on the sum plus the interest already added.
Does compounding more often matter much?
A little. Going from yearly to monthly adds a modest amount; the number of years and the rate matter far more.
Can I use it for a loan?
Yes, for a loan where interest is added to the balance and nothing is repaid. For EMIs use the EMI calculator.
What is the effective annual rate?
The true yearly growth after compounding. A 10% rate compounded monthly is about 10.47% a year.