What is this calculator?
This calculator shows how a lump sum grows when interest is added back to the balance and then itself earns interest. You control the compounding frequency, which determines how often that reinvestment happens.
Use it when:
- You want to see the future value of a one-time amount growing at a fixed rate.
- You are demonstrating or learning how compounding differs from simple interest.
- You need to compare the effect of annual, quarterly, monthly, or daily compounding.
Intended for: Savers, students, and anyone modelling the growth of a single amount at a fixed compounding rate.
How is this calculated?
- The tenure is converted to a number of years.
- The annual rate is divided by the number of compounding periods per year to give the rate applied at each compounding event.
- That rate is applied repeatedly — once per compounding period, for the whole tenure — with each period's interest added to the balance before the next period is calculated. This is what makes the growth compound rather than linear.
- Interest earned is the maturity value minus the original deposit.
Formulas
Maturity value
A = P × (1 + i / m)^(m × t)
The deposit grows by a factor of (1 + i/m) once per compounding period, for m × t periods in total.
- P
- Principal — the amount deposited
- i
- Annual interest rate as a decimal (e.g. 0.07 for 7%)
- m
- Compounding periods per year (1, 2, 4, 12, or 365)
- t
- Tenure in years
Interest earned
Interest = A − P
The growth on top of the amount you deposited.
Example
A deposit of 100,000 at 7% per year for 2 years, compounded quarterly.
- Quarterly compounding means m = 4, so each quarter applies 7% ÷ 4 = 1.75%.
- Over 2 years there are 4 × 2 = 8 such quarters.
- 100,000 × 1.0175^8 ≈ 114,888.
Result: Maturity value ≈ 114,888, interest earned ≈ 14,888.
Frequently asked questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal, so it grows in a straight line. Compound interest is calculated on the principal plus all interest already added, so it grows faster and faster over time.
Why does compounding frequency matter if the annual rate is the same?
A higher frequency means interest joins the balance sooner and begins earning earlier. The stated annual rate is the same, but the effective annual yield is higher.
Does this account for inflation?
No. The result is a nominal amount. To see what it is worth in today's purchasing power, run the result through an inflation calculation.
Assumptions
What this calculator takes as given:
- The interest or return rate you enter is treated as fixed for the entire period.
- Every period is treated as equal in length; no calendar-day, leap-year, or day-count convention is applied.
- Interest is compounded at the chosen frequency and reinvested into the deposit rather than paid out.
- The deposit is held to maturity.
Limitations
What this calculator cannot know or does not model:
- Tax on interest, including any deduction at source, is not applied.
- Premature-withdrawal penalties and the reduced rates that accompany them are not modelled.
- Banks that pay interest out periodically instead of reinvesting it will produce a different total.
- Preferential rates (for example for senior citizens) must be entered manually as the rate.