Compounding · Moneyable

Compound interest calculator: principal, rate and years

Compound interest is hard to do in your head, because every year earns on the years before it. Enter a sum, a rate and a number of years.

Year	Compound	Simple	Difference
1	10,500	10,500	0
2	11,025	11,000	25
3	11,576	11,500	76
4	12,155	12,000	155
5	12,763	12,500	263
6	13,401	13,000	401
7	14,071	13,500	571
8	14,775	14,000	775
9	15,513	14,500	1,013
10	16,289	15,000	1,289

Why the guess comes out low

Put 3,000,000 away at 5 percent for three years and the quick answer is 3,450,000 — three lots of 150,000. The right answer is 3,472,875, because the second and third years also earn on the interest already paid. The gap is small at three years and larger than the original sum at thirty.

The rule of 72

Divide 72 by the yearly rate and you get roughly the number of years a sum takes to double: about fourteen years at 5 percent, about ten at 7. It is an approximation, and the table above is the exact version of it.