Question 1

What is compound interest?

Accepted Answer

Compound interest is interest calculated on the initial principal and also on the accumulated interest over previous periods. It's essentially 'interest on interest,' which makes your money grow faster than simple interest.

Question 2

How does the compound interest calculator work?

Accepted Answer

Our calculator uses the compound interest formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years. It also accounts for additional deposits and withdrawals.

Question 3

What is the difference between different compounding frequencies?

Accepted Answer

Compounding frequency refers to how often interest is calculated and added to your principal. Options include daily (365/year), weekly (52/year), monthly (12/year), quarterly (4/year), and annually (1/year). More frequent compounding results in slightly higher returns over time.

Question 4

How do additional deposits affect compound interest?

Accepted Answer

Regular deposits significantly increase your investment growth over time. Each deposit begins earning interest immediately, creating multiple streams of compound growth. Even small regular contributions can dramatically increase your final balance over long periods.

Advanced Compound Interest Calculator

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