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Initial investment or deposit
Yearly interest rate
Investment or loan duration
How often interest is compounded
Principal Amount
—
Your initial amount
Compound Interest
—
Interest on interest
Total Amount
—
Principal + CI

Compound Interest Growth

Yearly Breakdown

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What Is Compound Interest?

Compound interest is calculated on both the initial principal and accumulated interest from previous periods. Unlike simple interest (only on principal), compound interest grows exponentially because you earn "interest on interest."

The more frequently interest is compounded (daily, monthly, quarterly, annually), the higher the effective return. This is why choosing the right compounding frequency matters for investments.

Compound Interest Formula

A = P × (1 + r/n)n×t
A = Final amountP = Principalr = Annual rate (decimal)n = Compounding frequency/yeart = Time in years

Frequently Asked Questions

Simple vs compound interest?
Simple interest is calculated only on principal. Compound interest includes accumulated interest. For ₹1L at 10% for 20 years: SI gives ₹3L, CI gives ₹6.73L. The difference grows with time and rate.
How does compounding frequency affect returns?
More frequent compounding gives higher returns. For ₹1L at 10% for 10 years: annual=₹2.59L, quarterly=₹2.61L, monthly=₹2.61L. Difference grows over decades.
What is the Rule of 72?
Divide 72 by the interest rate to estimate doubling time. At 8%, money doubles in ~9 years. At 12%, in 6 years. Works best for rates between 6-12%.
Is compound interest good or bad?
Excellent for investments — wealth grows exponentially. Bad for loans and credit card debt — you pay interest on interest. Always be on the earning side of compounding.

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