Compound Interest Calculator

How compounding frequency changes the result

The more often interest is added, the faster the balance grows, but the effect shrinks as frequency rises. ₹1,00,000 at 8% for 10 years grows to about ₹2,15,892 with yearly compounding, about ₹2,20,804 with quarterly compounding and about ₹2,21,964 with monthly compounding.

Time matters far more than frequency. Doubling the period from 10 to 20 years at 8% yearly takes the same ₹1,00,000 to about ₹4,66,096. Starting early is the single biggest lever. The rule of 72 gives a quick check: divide 72 by the annual rate to estimate the years needed to double, so 72 ÷ 8 ≈ 9 years.

The compound interest formula

Compound interest means you earn interest on previous interest as well as on the original deposit. The formula is A = P × (1 + r/n)^(n × t), where P is the principal, r the annual rate as a decimal, n the number of times interest is added per year and t the number of years. The interest earned is A − P.

More frequent compounding gives a slightly higher result, but the effect is small compared with the rate and the time invested. Time is the most powerful factor: money roughly doubles every 72 ÷ rate years (the rule of 72).

Worked example

Investing 1,00,000 at 7 percent compounded quarterly for 10 years: r/n = 0.0175 and n × t = 40. (1.0175)^40 ≈ 2.0016, so A ≈ 2,00,160 and interest is about 1,00,160. With annual compounding the result would be 1,96,715, so quarterly compounding adds about 3,445 over ten years.

Compound vs simple interest

Simple interest on the same deposit would be 1,00,000 × 0.07 × 10 = 70,000, much less than 1,00,160. The gap grows quickly with longer periods. Remember that tax on interest and inflation both reduce your real return; a 7 percent return with 5 percent inflation grows purchasing power by only about 2 percent a year.