Compound Interest Calculator

📈 Why invest with compound interest?

📈 How to calculate compound interest?

Compound interest is the most efficient way to grow your money over time. Unlike simple interest, where earnings are calculated only on the initial capital, in compound interest, past earnings also generate new earnings. This results in exponential growth.

For example, if you invest $1,000 with an interest rate of 5% per year, see how the results change over time:

• After 1 year: $1,050.00
• After 2 years: $1,102.50
• After 10 years: $1,628.89

📈 How to calculate compound interest?

The compound interest formula is:

<code>M = C × (1 + i) ^ t</code>

Where:

• M = Final amount
• C = Initial capital
• i = Interest rate (converted to decimal, for example, 5% = 0.05)
• t = Investment period

📊 Practical example

Imagine you invest $1,000.00 with an interest rate of 5% per year for 10 years. Using the formula:

M = 1000 × (1 + 0.05) ^ 10 <br> M = $1,628.89

This means that, at the end of the period, your initial investment of $1,000.00 will have grown to $1,628.89, even without additional contributions.

📌 What is the difference between compound and simple interest?

While <strong>simple interest</strong> is calculated only on the initial amount, <strong>compound interest</strong> accumulates on previous interest, increasing the final amount.