Question 1

What is compound interest?

Accepted Answer

Compound interest is interest earned on both your original principal and on previously earned interest. Over long periods it grows much faster than simple interest.

Question 2

How does compounding frequency affect the result?

Accepted Answer

More frequent compounding (daily vs. annually) produces a slightly higher future value at the same annual rate, because interest starts earning interest sooner.

Question 3

What formula does this calculator use?

Accepted Answer

Future value = P × (1 + r/n)^(n×t), where P is the principal, r is the annual rate, n is compounding periods per year and t is the number of years.

Question 4

Is this the same as APY?

Accepted Answer

Effectively yes: the compounded annual growth rate is your APY. APR is the stated rate before compounding is applied.

Compound Interest Calculator