How to Calculate Compound
What is Compound?
Compound interest earns returns on both the initial principal and previously accumulated interest. This creates exponential growth. Simple interest, by contrast, only grows on the original principal.
Step-by-Step Guide
- 1A = P(1 + r/n)^(nt) for periodic compounding
- 2A = Pe^(rt) for continuous compounding
- 3Rule of 72: years to double ≈ 72 ÷ annual rate %
Worked Examples
Input
$1,000 at 5%, 10 yrs (annual)
Result
$1,628.89
Interest: $628.89
Input
$1,000 at 5%, 10 yrs (monthly)
Result
$1,647.01
$18 more from monthly compounding