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About the Compound Interest Calculator
Compound interest pays interest on interest already earned. The difference against simple interest is trivial in the first year and enormous over twenty — which is the entire basis of long-term investing.
Frequency matters less than most people assume. Moving from annual to daily compounding at 10% adds only about half a percentage point to the effective yield. Time and rate do the heavy lifting.
The formula
The effective annual yield is (1 + r/f)^f − 1, which is what you should compare across products.
Things worth knowing
Frequently asked questions
Interest calculated on the principal plus all previously accumulated interest, so the base grows each period. Simple interest is calculated only on the original principal.
Less than expected. At 10%, annual compounding yields 10% and daily compounding about 10.5%. The rate and the number of years matter far more.
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