What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest. It's "interest on interest," causing exponential growth.

How does compounding frequency affect returns?

More frequent compounding = higher returns. Daily compounding slightly outperforms monthly, which outperforms quarterly, which outperforms annual.

What is the Rule of 72?

Divide 72 by your interest rate to estimate how many years it takes to double your money. At 8% rate, your money doubles in about 9 years.

Compound Interest Calculator

See the power of compounding. Calculate how your investment grows with regular contributions and compound interest.

Investment Details

Formula

A = P × (1 + r/n)^(n×t) + M × ((1 + r/12)^months − 1) / (r/12) P = Principal, r = Annual Rate n = Compounds/year, t = Years M = Monthly Contribution

Worked Example

Rs. 100,000 invested at 12% a year, compounded monthly, plus Rs. 5,000 added every month, grows to Rs. 1,480,232.14 after 10 years. You put in Rs. 700,000; the other Rs. 780,232.14 is compound growth. Without the monthly additions, the same Rs. 100,000 grows to Rs. 330,038.69.

How to Interpret the Result

Compounding rewards time above all: most of the growth arrives in the later years. The result assumes the same return every month, which real investments never deliver, so use it to compare scenarios rather than as a forecast.

Common Mistakes

Ignoring inflation when you read the final figure. Assuming a high return will be steady year after year. Forgetting fees and taxes, which compound too.

Learn the Method

Free lessons that explain the ideas behind this calculator:

How to Open a CDC Account How to Value Stocks in Pakistan Dividend Investing in Pakistan

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Disclaimer: This tool is for educational and informational purposes only. Results are based on mathematical calculations and may not reflect actual financial outcomes. Always consult a certified financial advisor before making investment decisions.