Question 1

What is compound interest?

Accepted Answer

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. It's often called 'interest on interest', and it's what makes investments grow exponentially over time.

Question 2

How often is interest typically compounded?

Accepted Answer

Compounding frequency can be daily, weekly, monthly, quarterly, semi-annually, or annually. The more frequently interest is compounded, the faster your investment grows. Our calculator lets you select the frequency to see the difference.

Question 3

What is the difference between interest rate and APY?

Accepted Answer

The interest rate (or nominal rate) is the stated rate of interest. The Annual Percentage Yield (APY) is the effective annual rate of return taking into account the effect of compounding. APY will always be higher than the nominal rate if compounding occurs more than once per year.

Compound Interest Calculator

Compound Interest Calculator

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