Compound Interest Calculator

**Compound interest** is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. Unlike simple interest, which is calculated strictly on the base principal, compounding generates "interest on interest." Albert Einstein famously called compound interest the "eighth wonder of the world."

How Compound Interest is Calculated

The mathematical formula for compound interest with regular monthly contributions is:

A = P(1 + r/n)^(n*t) + PMT * [((1 + r/n)^(n*t) - 1) / (r/n)] * (1 + r/n)

• A = Final wealth accumulated (Future Value).
• P = Initial principal deposit.
• PMT = Monthly contribution amount.
• r = Annual interest rate (nominal decimal rate).
• n = Compounding frequency per year (e.g. 12 for monthly, 4 for quarterly).
• t = Number of years the money is invested.

Rule of 72: A Quick Shortcut

The **Rule of 72** is a fast shortcut to estimate how many years it will take to double your money. Divide 72 by your annual interest rate. For example, at an interest rate of 12% p.a., your money will double in approximately 72 / 12 = 6 years.