Calculating compound interest is a great way to grow your investment. It gives you returns not just on your principal investment but **also on the interest that piles up on that initial money**.

Suppose you decide to invest 100 (USD/INR/EURO) in a fixed deposit offering a 5% annual interest rate. After the first year, your investment grows to 105 (USD/INR/EURO). Now, when the interest is recalculated for the following year, it's based on the new total of 105 (USD/INR/EURO) instead of the principal 100 (USD/INR/EURO).

This means the interest for the next year will be earned on the updated balance (105), allowing your money to potentially grow faster due to this compounding effect.

## Compound Interest formula

A = P(1 + r/100) ^ nt

**P** is the initial amount you start with (the principal).
**r** is the interest rate per year.
**n** is how many times the interest is applied per year.
**t** is the number of years you leave the money invested.
**A** is the total amount you'll have at the end.

## How to use the calculatoro.com Compound Interest Calculator?

At the top of the page, enter the initial investment (principal amount), followed by the interest rate. Then, input the yearly contributions (Yearly contributions mean adding more money each year to the principal amount you're investing.) and the number of years. Click the "calculate" button, and within seconds, you'll see the exciting result. It's that simple!

## What is the difference between Compound interest and simple Interest?

Simple interest is calculated solely on the principal amount, while compound interest considers both the principal and accumulated interest for future calculations.