Principal ($)
Annual rate (%)
Time (years)
Compounding
Result
About compound interest
The formula
A = P(1 + r/n)^(nt) where P=principal, r=annual rate, n=compounds per year, t=time in years.
Rule of 72
Divide 72 by the interest rate to estimate years to double your money. At 8% → doubles in ~9 years.
Frequency matters
Monthly compounding yields slightly more than annual. The difference grows significantly over long periods.
Frequently Asked Questions
What is compound interest?
Interest calculated on both the initial principal and accumulated interest from previous periods. Unlike simple interest, compounding causes exponential growth.
What is the Rule of 72?
Divide 72 by the annual interest rate to estimate years to double your money. At 8%: 72/8 = 9 years. At 12%: 72/12 = 6 years.
APR vs APY?
APR is the stated annual rate without compounding. APY accounts for compounding frequency and is always higher than APR (except with annual compounding, where they're equal).