Interest Calculator
Calculate simple or compound interest and compare how yearly, quarterly, monthly, or daily compounding changes the result.
Interest Calculator
Dated reference: July 2026 U.S. CPI-U 12-month change: 3.36%. Snapshot retrieved 2026-09-10; reference is not a forecast or automatic input.
This calculator is for educational estimates only. Tax and inflation rates are simplified assumptions, not financial or tax advice.
How it works
Formula and steps
The formula shows how the interest calculator turns your inputs into the result. Use it to check the calculation, then follow the example steps to see each part of the math.
Formula & steps
Simple interest formula
I = P x r x t
Use this when interest does not compound.
I= Interest earnedP= Principal, or starting amountr= Annual interest rate as a decimalt= Time in yearsCompound interest formula
A = P(1 + r / n)^(n x t)
Use this when interest compounds on a set schedule.
A= Final amount with compound interestP= Principal, or starting amountr= Annual interest rate as a decimaln= Number of compounding periods per yeart= Time in years- 1Choose simple interest to calculate interest only on the original principal.
- 2Choose compound interest to reinvest interest so later periods can earn interest on earlier interest.
- 3When tax is enabled, subtract tax from each year's positive interest before the next year compounds.
- 4Divide the after-tax balance by the inflation factor to estimate real value.
Worked examples
$1,000 at 5% simple interest for 10 years
- 1
Convert the annual rate
5% / 100 = 0.05
- 2
Calculate simple interest
$1,000 x 0.05 x 10 = $500
- 3
Add interest to principal
$1,000 + $500 = $1,500
$1,000 at 5% compounded monthly for 10 years
- 1
Find the monthly rate
0.05 / 12 = 0.0041667
- 2
Find the number of periods
12 x 10 = 120
- 3
Apply the compound formula
$1,000 x (1 + 0.05 / 12)^120 = $1,647.01
Common uses
- Comparing simple and compound interest
- Testing annual, quarterly, monthly, or daily compounding
- Estimating interest after simplified taxes
- Estimating inflation-adjusted purchasing power
Common mistakes
- Using compound interest when interest is not reinvested.
- Treating the entered nominal annual rate as APY when interest compounds more than once per year.
- Assuming daily compounding means a daily deposit or payment; it only changes how often interest is added in this calculator.
- Applying tax to principal instead of only to positive interest earned.
Interest guide
Simple interest vs compound interest
Simple interest uses only the original principal. Compound interest adds earned interest to the balance, allowing later periods to earn interest on earlier interest.
Simple and compound interest comparison
This table uses the calculator logic with a $1,000 principal, 5% nominal annual rate, 10 years, no tax, and no inflation adjustment.
| Method | Interest additions/year | Effective annual rate | Final amount | Interest earned |
|---|---|---|---|---|
| Simple interest | None | 5% simple rate | $1,500.00 | $500.00 |
| Compound annually | 1 | 5% | $1,628.89 | $628.89 |
| Compound monthly | 12 | 5.12% | $1,647.01 | $647.01 |
| Compound daily | 365 | 5.13% | $1,648.66 | $648.66 |
More frequent compounding produces a slightly higher effective annual rate when the same nominal rate is used. Actual account APY depends on its terms and required disclosure method.
Annual, monthly, and daily compounding
The selected frequency is the number of times interest is calculated and added each year: once annually, four times quarterly, 12 times monthly, or 365 times daily. With a positive rate and all other inputs equal, more frequent compounding produces a slightly higher final amount.
Nominal annual rate versus APY
The annual-rate input is nominal: the calculator divides it by the selected compounding frequency. APY is an effective annual yield that includes compounding. At a 5% nominal rate compounded monthly, the calculated effective annual rate is about 5.12%. Use an account's disclosed terms when comparing real products.
Tax and inflation assumptions
When tax is enabled, this model deducts one constant tax rate from each year's positive interest before later interest compounds. When inflation is enabled, it divides the after-tax balance by a constant compounded inflation factor. Real tax timing, exemptions, rates, and inflation vary.
Compare dollar purchasing power by date →What this calculator does not model
Results assume a constant rate, fixed principal, selected compounding frequency, and no fees or cash flows. Daily mode uses 365 equal periods; it does not apply leap years, actual/360 or actual/365 day-count rules, variable rates, minimum balances, deposits, withdrawals, or lender-specific calculations.
Model recurring investment contributions →FAQ
Simple interest is calculated only on the original principal. The interest already earned does not earn additional interest.
Compound interest is interest on the original principal plus interest on interest already earned.
Use simple interest when interest is not reinvested. Use compound interest when earned interest stays in the balance and can earn more interest.
With the same positive nominal annual rate, more frequent compounding usually produces a slightly larger ending balance because interest is added to the balance sooner.
Not necessarily. This calculator treats the input as a nominal annual rate and divides it by the selected number of compounding periods. APY reflects the effective annual yield after compounding and may be higher.
The calculator divides the nominal annual rate into 365 periods and adds interest 365 times per year. It does not model day-count conventions, leap years, deposits, withdrawals, or account-specific posting rules.
Tax is subtracted from each year's positive interest using one constant rate. Inflation is then applied to the after-tax balance using one constant annual rate. Both are simplified educational assumptions.
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