Compound Interest Chatbot Calculator

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest rather than paying it out so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

Simple interest is based on the principal amount of a loan or deposit, while compound interest is based on the principal amount and the interest that accumulates on it in every period. Since simple interest is calculated only on the principal amount of a loan or deposit, it's easier to determine than compound interest.

Banks typically pay compounded interest on deposits, a benefit for depositors. If you are a credit card holder, knowledge of the workings of compound interest calculations may be an incentive to pay off your balances quickly. Credit card companies charge interest on the principal amount and the accumulated interest.

Formula
Compounded Interest = Initial Investment (1+ r) ^ n - Initial Investment
Future Value of Investment = Initial Investment (1+ r) ^ n
r = interest rate per period
n = number of periods