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Compound Interest Calculator

Calculate the growth of your savings or investments over time with regular compounding and contributions.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Accumulated Interest $8,193.97
Future Wealth Balance $18,193.97
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Expert Tip

Compounding monthly means interest is paid and reinvested 12 times a year, increasing earnings compared to annual compounding.

How this Calculator Works

This calculator estimates the future value of a deposit account by compounding interest on the principal and adding regular contributions. It shows how compound interest helps build wealth much faster than simple interest. Individuals use it to plan savings and retirement targets.

Formula & Methodology

Future Value = [ Principal * (1 + r / n)^(n * t) ] + [ PMT * ((1 + r / n)^(n * t) - 1) / (r / n) ] - Principal is the initial deposit amount. - r is the annual nominal interest rate. - n is the compounding periods per year. - t is the total number of years. - PMT is the regular recurring contribution amount added at each compounding period.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

You deposit $5,000 into a savings account with a 5% interest rate compounded monthly, adding a monthly contribution (PMT) of $100 for 3 years. 1. Calculate periodic rate (r/n): 0.05 / 12 = 0.004167. Total periods (nt): 36. 2. Compute growth on principal: $5,000 * (1.004167)^36 = $5,808. 3. Compute growth on contributions: $100 * [ ((1.004167)^36 - 1) / 0.004167 ] = $3,878. 4. Add components: $5,808 + $3,878 = $9,686. Result: The savings account will grow to a final balance of $9,686 after 3 years.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This investment analytics calculator evaluates portfolio yield, compounding growth, risk-adjusted returns, present/future asset valuations, and capital growth metrics based on CFA and modern portfolio theory (MPT) principles.

Variable Glossary

Input

Investment Parameters

Initial principal, periodic contribution, interest rate, discount factor, holding period, or asset price inputs.

Parameter

Performance Metrics

Compound Annual Growth Rate (CAGR %), Net Present Value (NPV), Internal Rate of Return (IRR), or Sharpe ratio.

How to Calculate Step-by-Step

1

Step 1

Enter your initial investment capital, asset purchase prices, or cash flow streams.

2

Step 2

Set compounding frequency, discount rate, or benchmark risk-free rate factors.

3

Step 3

Review calculated total return value, annualized growth %, or risk-adjusted alpha/beta statistics.

FAQ

How does compounding frequency impact investment returns?
More frequent compounding (e.g. monthly or daily vs. annually) generates higher effective annual yields (APY) because interest is calculated on accumulated interest earlier in the period.
What is the difference between Sharpe Ratio and Sortino Ratio?
The Sharpe ratio divides excess return by total standard deviation (both upside and downside volatility), whereas the Sortino ratio divides excess return by downside deviation only.
Should investment calculators replace professional wealth management?
No. Investment calculators model financial mathematics under assumed growth rates. Actual market performance fluctuates, so consult a licensed financial planner (CFP) or RIA for personalized advice.