ToolkitBeeHow to use
- Enter the principal amount.
- Enter the yearly interest rate and the time period.
- Choose how often interest is compounded.
- See the final amount, the interest, and how much more you earn than with simple interest.
Formula
Compound interest: A = P × (1 + r ÷ k)k × t
Simple interest: SI = P × r × t
where P = principal, r = yearly rate ÷ 100, k = compounding periods per year, t = years.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original amount. Compound interest is also calculated on the interest already earned, so it grows faster over time.
Does monthly compounding give more?
Yes, slightly. The more often interest is added, the higher the final amount at the same rate.
What is the Rule of 72?
Divide 72 by the interest rate to estimate how many years it takes to double your money. At 8%, it takes about 9 years.