Compound interest calculator

What the result means

Compound interest pays interest on interest. The more often a rate compounds, the closer the result sits to the equivalent continuous rate — still far below a “double every year” myth.

How it is calculated

FV = P(1 + r/n)^(nt) + PMT × ((1 + r/n)^(nt) − 1) / (r/n)

• P: Starting principal.
• r: Nominal annual rate as a decimal.
• n: Compounding periods per year.
• t: Time in years.
• PMT: Optional deposit each period.

The first term grows the opening balance. The second term grows a level deposit stream. If the rate is zero, the result is principal plus deposits.

Worked example

$10,000 at 5% for 10 years, monthly compounding

A term deposit-style example with no further deposits.

Monthly rate

5% ÷ 12

Periods

120

Future value

About $16,470

Interest is a bit more than $6,400. Adding monthly deposits would raise both contributions and interest.

This is not a forecast of a share market

A savings account may quote a compounding rate. Shares and property do not compound on a fixed schedule. Fees, tax on interest and variable rates will change the outcome.

Regular deposits are modelled as an ordinary annuity at the same frequency as compounding. Real banks may credit interest monthly even if you deposit weekly.

Questions