MoneyFree, ad-light financial calculators for India, the US and the Gulf – each with the formula, a worked example and a quick-reference table.
See how a lump sum grows with compound interest, and how much the compounding frequency matters.
Formula
A = P (1 + r/n)n·t where n = compounding periods per year
Worked example
Rs 1,00,000 at 8% for 10 years, compounded monthly: A = 100000 × (1 + 0.08/12)120 ≈ Rs 2,21,964. Compounded annually it would be only Rs 2,15,892 - the monthly compounding adds about Rs 6,000.
Quick reference
| Rate | 5 yr | 10 yr | 20 yr |
|---|---|---|---|
| 6% | 1.35 L | 1.82 L | 3.31 L |
| 8% | 1.49 L | 2.22 L | 4.93 L |
| 10% | 1.65 L | 2.71 L | 7.33 L |
| 12% | 1.82 L | 3.30 L | 10.89 L |
Growth of Rs 1,00,000, compounded monthly.
Frequently asked questions
What is compound interest?
Compound interest is interest calculated on both the original principal and the interest already added. Because each period’s interest earns interest of its own, the balance grows faster over time than with simple interest.
Does compounding frequency really matter?
Yes, but less than people expect. Moving from annual to monthly compounding at 8% over 10 years adds roughly 3% to the final amount. Moving from monthly to daily adds only a fraction of a percent.
What is the rule of 72?
Divide 72 by the annual return to estimate how many years it takes money to double. At 8%, that is 72 ÷ 8 = 9 years.