Compound Interest Calculator

Form Instructions

Fill in any three fields and leave one field empty to compute its value. (example: leave interest rate empty to calculate its value). Thus, this calculator can compute principal, interest rate, time or future value. (Note: future value will be lower if taxes are applied to the interest each year.)

• Principal -- Amount invested to earn a fixed interest rate (eg: Bank CD or Savings Account)
• Interest Rate, APY -- Interest rate earned per year
• Time, years -- Duration of CD after which interest is paid out.
• Future Value (principal + compound interest) -- Final value after adding compound interest to principal

How Compound Interest works

Suppose you deposited $100 into a bank account that pays 10% interest annually. After 1 year, the value of your account will be $110 ($100 principal + $10 interest). After the second year, the account value will be $121 ($11 interest). After 3rd year, the value will become $133 ($12 interest). Each year, the interest earned increases because the interest of the previous year is added to the principal, or compounding the principal. With simple interest, the value of the account after 3 years would be $130 (3 x 10% x $100 = $30 interest). In this example, compound interest yields an extra $3 interest over simple interest, and in general, the interest returned can be greatly increased by monthly deposits and starting with a higher principal.

To see how interest earned increases due to compounding, try the Compound Interest Calculator with Monthly Deposit with monthly deposit set to $0.

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