Compound Interest
Interest calculated on the principal plus accumulated interest — the engine behind long-term wealth creation.
Definition
Compound interest means interest each period is calculated on the principal plus all previously accumulated interest. Over long horizons, this exponential growth pattern dramatically outperforms simple interest (where interest is calculated only on the original principal).
Compounding frequency matters: daily > monthly > quarterly > annual, though the difference at typical rates is small. Indian bank FDs use quarterly compounding by default; PPF uses annual compounding; mutual funds compound continuously through unit-NAV growth.
Formula
A = P × (1 + r/n)^(n × t)Example
₹1 lakh at 10% for 30 years compounded annually → ₹17.45 lakh. Same amount at simple 10% would only be ₹4 lakh. Compounding contributes ₹13.45 lakh.
Calculators that use this
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Calculate compound interest on any investment with flexible compounding frequency — monthly, quarterly, or annually.
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Calculate the future value of your monthly Systematic Investment Plan (SIP) in mutual funds. See total invested, gains, and final corpus.
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Calculate the maturity amount of your fixed deposit with quarterly compounding (standard for Indian banks).
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