How compound interest grows.
Compound interest earns interest on interest. How a starting amount and monthly amounts grow, compounded yearly, quarterly, monthly or daily.
By Suraj Kumar3 min read
Interest that is added to the balance earns interest itself. That is all compounding is.
The formula.
A starting amount P grows to P(1 + i)^n, and a monthly amount C adds C·((1 + i)^n − 1)/i, times (1 + i) more when it goes in at the start of each month.
How often it is compounded.
6% compounded monthly is 6.17% over a year, and daily 6.18%. The page turns any compounding into an equal monthly rate, so periods are never mixed.
One steady rate.
The answer holds your rate steady every year; real returns go up and down.
Further reading
Topics: compound interest calculator · compound interest formula · interest on interest · monthly compound interest · compounding frequency
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