Compound Interest Calculator
Calculate how your investment or savings grows over time with compound interest, using annual, semi-annual, quarterly, or monthly compounding.
How Is Compound Interest Calculated? (Formula)
Compound Interest = A − P
Where: P = Principal, r = Annual interest rate (decimal), n = Compounding periods per year, t = Time in years, A = Maturity amount
Step-by-Step Calculation
1. Convert the annual rate to decimal: r = Rate ÷ 100.
2. Divide r by the number of compounding periods per year (n).
3. Add 1 to this value.
4. Raise it to the power of (n × t), where t is the number of years.
5. Multiply the result by the principal (P) to get the maturity amount (A).
6. Subtract P from A to get the total compound interest earned.
Example Calculation
| Input | Value |
|---|---|
| Principal (P) | ৳1,00,000 |
| Annual Rate | 8% |
| Compounding | Monthly (n = 12) |
| Time | 10 years |
| Maturity Value | ≈ ৳2,21,964 |
| Interest Earned | ≈ ৳1,21,964 |
Definitions
Compound Interest: Interest calculated on both the initial principal and the accumulated interest of previous periods, causing money to grow faster than simple interest.
Compounding Frequency: How often interest is added to the principal in a year — e.g., monthly compounding adds interest 12 times a year.
Frequently Asked Questions
What is compound interest?
Compound interest is interest earned on both your original principal and the interest already added to it, so your money grows faster over time compared to simple interest.
What is the compound interest formula?
The formula is A = P x (1 + r/n)^(n x t), where P is principal, r is the annual interest rate, n is the compounding frequency per year, and t is time in years.
Does more frequent compounding earn more interest?
Yes, more frequent compounding (e.g., monthly instead of annually) results in slightly higher returns because interest is calculated and added more often.
What is the difference between simple interest and compound interest?
Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus any interest already accumulated, leading to faster growth over time.
This calculator provides an estimate for planning purposes only and does not constitute financial or investment advice.
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