Compound Interest — The Complete Guide
Compound interest is interest calculated on both the principal and accumulated interest. The longer the time period, the more dramatic the exponential growth.
The Formula
A = P × (1 + r/n)^(n×t)
A = Final amount
P = Principal
r = Annual interest rate (as decimal)
n = Compounding periods per year
t = Years
Numerical Example
$10,000 at 7% annual interest, monthly compounding, for 30 years:
A = 10,000 × (1 + 0.07/12)^(12×30) = $76,123
The principal grew 7.6× without any additional contributions!
The Rule of 72
To find how many years to double your money: divide 72 by the annual rate.
Years to double = 72 ÷ Interest Rate %
Example: 72 ÷ 6% = 12 years
Related Calculators: