Interest Calculator Guide: Calculate Simple & Compound Interest for Investments
An interest calculator computes simple and compound interest over time. Enter principal, rate, time, and compounding frequency to see total interest and the final amount.
What is Interest Calculator?
The interest calculator is a quick way to compare accounts or loans, test compounding schedules, and convert between nominal rates and effective annual rates (EAR/APY).
How to Use the Interest Calculator
- Enter principal (P), annual rate
r, timet(years). - Select compounding (daily, monthly, quarterly, annually, or continuous).
- Calculate final amount (A) and interest earned/paid.
- (Optional) include periodic contributions or withdrawals.
- Compare EAR/APY across compounding options.
Formulas & Methods
- Simple interest:
I = P*r*t→A = P + I - Compound:
A = P*(1 + r/n)^(n*t);Interest = A - P - Continuous compounding:
A = P*e^(r*t) - Effective annual rate:
EAR = (1 + r/n)^n - 1
Assumptions & limitations
- Rate
ris nominal and constant duringt. - Taxes and fees reduce net return; model them explicitly if needed.
- For loans, see the Loan or Mortgage calculator for amortization.
Examples
Example A — Monthly compounding
P = $10,000, r = 5%, t = 3 y, n = 12 → A ~ 10,000*(1+0.05/12)^(36) ~ $11,614; interest ~ $1,614.
Example B — Simple interest
P = $2,500, r = 6%, t = 2 y → I = 2,500*0.06*2 = $300; A = $2,800.
| Mode | Formula | Notes |
|---|---|---|
| Simple | I = P*r*t | No compounding |
| Compound | A = P(1 + r/n)^(nt) | With periods |
| Continuous | A = P*e^(rt) | Limit as n->infinity |
Pro Tips & Best Practices
- Compare using EAR/APY to normalize compounding differences.
- For short terms, simple vs monthly may be similar; for long terms, compounding dominates.
- Reinvest interest to harness compounding; model fees explicitly.
Related Calculators
FAQ
Q: What is the difference between simple and compound interest?
A: Simple interest grows linearly on principal only; compound interest earns interest on interest at each compounding period.
Q: How do I compute interest earned?
A: Simple: I = Prt. Compound: A = P*(1 + r/n)^(n*t) - P.
Q: What compounding frequencies are supported?
A: Common options: daily, monthly, quarterly, annually, and continuous.
Q: How do fees affect returns?
A: Model as a lower net rate or subtract periodic fees from the balance before compounding.
Q: Are results guaranteed?
A: No—rates change and markets vary. Use this for planning, not predictions.
Compliance note: This article is for information only and not financial advice.
Call to Action
Enter principal, rate, and time—compare simple vs compound and different compounding schedules to make informed decisions.