What is Compound Interest?
Compound interest is interest calculated on both the principal AND previously earned interest. It's what makes your money grow exponentially.
Simple vs Compound Interest
| Type | Formula | |------|---------| | Simple | A = P × (1 + rt) | | Compound | A = P × (1 + r/n)^(nt) |
The Magic of Compounding
Example: ₹1 Lakh invested at 12% for 30 years
| Method | Result | |--------|--------| | Simple Interest | ₹4.6 Lakh | | Compound (Yearly) | ₹30 Lakh | | Compound (Monthly) | ₹36 Lakh |
Calculate your returns: Compound Interest Calculator
Rule of 72
Quick way to estimate doubling time:
Years to Double = 72 ÷ Interest Rate
At 12% return: 72 ÷ 12 = 6 years to double
Compounding Frequencies
| Frequency | Annual Multiplier (12%) | |-----------|------------------------| | Yearly | 1.12 | | Quarterly | 1.1255 | | Monthly | 1.1268 | | Daily | 1.1275 |
Start Early
Starting 10 years earlier can DOUBLE your final wealth due to compounding!
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