Interest Calculator — Simple & Compound Interest

Simple interest is calculated only on the original principal: Interest = P × r × t. Compound interest is calculated on principal plus accumulated interest — you earn interest on your interest. Example: $10,000 at 5% for 10 years: Simple interest = $5,000 total interest, ending balance $15,000. Compound interest (annual) = $6,289 total interest, ending balance $16,289. The difference grows dramatically over longer periods.

The more frequently interest compounds, the more you earn, because each compounding period adds to the base. Annual compounding on $10,000 at 10% for 1 year = $1,000 interest. Monthly compounding = $1,047. Daily compounding = $1,052. The difference seems small per year, but over 30 years at 7%, daily compounding on $10,000 gives $76,122 vs. $74,614 for annual — a $1,500 difference from the same rate.

The Rule of 72 is a quick estimate of how long it takes for an investment to double: Years to double = 72 / annual interest rate. Examples: at 6% → doubles in 12 years; at 8% → doubles in 9 years; at 12% → doubles in 6 years. The rule works because compound growth is roughly exponential, and 72 is easily divisible by common rates.

Yes. For savings accounts, use the APY (Annual Percentage Yield) as the rate — APY already accounts for compounding frequency. For CDs (Certificates of Deposit), use the stated APY and set the term. For checking accounts, the interest rate is usually near 0%. The calculator is also useful for estimating bond returns, money market accounts, and treasury yields.

The effective annual rate (EAR), also called the annual equivalent rate (AER), is the actual return when compounding is taken into account. Formula: EAR = (1 + r/n)^n − 1, where r is the nominal rate and n is the number of compounding periods per year. Example: 12% nominal, compounded monthly → EAR = (1 + 0.12/12)^12 − 1 = 12.68%. Banks quote APY which is the same as EAR.