What is the compound interest formula?

A = P x (1 + r/n)^(n x t), where P is principal, r is the annual rate, n is the number of times interest compounds per year, and t is the number of years. Compound interest = A - P.

Does compounding frequency matter?

Yes. More frequent compounding gives a slightly higher return. Monthly compounding earns a little more than quarterly, which earns more than yearly, for the same nominal rate.

Why is compound interest called the eighth wonder?

Because over long periods it produces dramatic growth. A sum compounding at 12% roughly doubles every 6 years, so small, early, consistent investments can grow into a large corpus.

Compound Interest Calculator

Calculate compound interest and maturity value. Choose yearly, half-yearly, quarterly or monthly compounding to see how your money grows.

Principal Amount

₹

₹1,000₹1,00,00,000

One Lakh Rupees

Interest Rate

1%30%

Time Period

yrs

1 yrs40 yrs

Compounding Frequency

Principal

₹1.00 L

Total Interest

₹1.69 L

Maturity Value

₹2.69 L

Year-by-Year Breakdown

Year-by-Year Breakdown
Year	Amount Invested	Est. Returns	Total Value
Yr 1	₹1.00 L	₹10,381	₹1.10 L
Yr 2	₹1.00 L	₹21,840	₹1.22 L
Yr 3	₹1.00 L	₹34,489	₹1.34 L
Yr 4	₹1.00 L	₹48,451	₹1.48 L
Yr 5	₹1.00 L	₹63,862	₹1.64 L
Yr 6	₹1.00 L	₹80,873	₹1.81 L
Yr 7	₹1.00 L	₹99,650	₹2.00 L
Yr 8	₹1.00 L	₹1.20 L	₹2.20 L
Yr 9	₹1.00 L	₹1.43 L	₹2.43 L
Yr 10	₹1.00 L	₹1.69 L	₹2.69 L

Compound interest is calculated on the principal plus accumulated interest. More frequent compounding gives a slightly higher return.

What is compound interest?

Compound interest is interest earned on both the original principal and on all previously accumulated interest. It is one of the most important ideas in personal finance - Einstein reportedly called it the 8th wonder of the world. The difference between simple and compound interest looks small over short periods but becomes dramatic over decades. ₹1 lakh at 10% simple interest for 30 years grows to ₹4 lakh. At 10% compound interest, it grows to ₹17.45 lakh - over 4× more.

How to use the Compound Interest Calculator

Enter the principal. The original deposit or investment amount.
Enter the annual rate. Use the annual interest rate as a percentage.
Enter the time in years. How long the money stays invested.
Choose compounding frequency. Yearly, half-yearly, quarterly or monthly.
Read the final value and interest. See total accumulated and how much came from compounding vs principal.

Formula and method

Amount = P × (1 + r/n)^(n × t) Compound Interest = Amount − P

P is principal, r is annual rate (decimal), n is compounding periods per year, t is time in years. More frequent compounding (e.g. monthly vs yearly) gives slightly higher returns.

Why compounding is the most important idea in finance

Time is the most powerful variable. The longer you stay invested, the steeper the curve.
Reinvestment matters. Don't withdraw interest in the early years - let it ride.
Small rates, big results. 2% extra return compounded for 30 years roughly doubles your end corpus.
Works against you too. Credit card debt at 30-40% compounds the same way - but pointed at your wallet.
Underlies every long-term plan. SIP, FD, PPF, EPF, NPS - all are compound-interest engines.

₹1,00,000 at compound interest, yearly compounding

Rate	10 years	20 years	30 years
6%	≈ ₹1.79 lakh	≈ ₹3.21 lakh	≈ ₹5.74 lakh
8%	≈ ₹2.16 lakh	≈ ₹4.66 lakh	≈ ₹10.06 lakh
10%	≈ ₹2.59 lakh	≈ ₹6.73 lakh	≈ ₹17.45 lakh
12%	≈ ₹3.11 lakh	≈ ₹9.65 lakh	≈ ₹29.96 lakh

Illustrative compounding annually. More frequent compounding gives slightly higher results. Equity returns are not guaranteed.