How compound interest works
Compound interest adds each period’s return to the balance, so later returns are earned on both the original amount and earlier gains.
Calculate compound interestTest different amounts, rates and time periods.Compound interest formula
Future value equals principal × (1 + periodic rate) raised to the number of periods. Use matching units: a monthly rate needs a number of months.
Worked example
10,000 growing at 5% once per year for 10 years becomes about 16,288.95 before taxes and fees.
Compound interest questions
Does compounding frequency matter?
Yes. With the same nominal rate, more frequent compounding generally produces a slightly higher future value.
Does the result include tax?
No. Tax, fees and changing rates can reduce the actual return.