Compound Interest has the ability to multiply money almost magically. Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding.


Compound Interest Calculations Table
Year  Periods  Starting Value  Multiplier  Interest Earned  End Value 
1  1  10,000.00  1 %  100.00  10,100.00  2  1  10,100.00  1 %  101.00  10,201.00  3  1  10,201.00  1 %  102.01  10,303.01  4  1  10,303.01  1 %  103.03  10,406.04  5  1  10,406.04  1 %  104.06  10,510.10  6  1  10,510.10  1 %  105.10  10,615.20  7  1  10,615.20  1 %  106.15  10,721.35  8  1  10,721.35  1 %  107.21  10,828.57  9  1  10,828.57  1 %  108.29  10,936.85  10  1  10,936.85  1 %  109.37  11,046.22 
Compound Interest
Interest on an investment's interest, plus previous interest. The more frequently this occurs, the sooner your accumulated interest will generate additional interest. You should check with your financial institution to find out how often interest is being compounded on your particular investment.
Compound Interest Formula
FV = PV*(1+Rn/m)m*t
 FV = final value, final amount, future value
 PV = principal amount, present value (initial investment)
 Rn = annual nominal interest rate (as a decimal)
 m = number of times the interest is compounded per year
 t = number of years
Demonstration of Various Compounding
The following table shows the final principal (FP), after t = 1 year, of an account initially with C = $10000, at 6% interest rate, with the given compounding (n). As is shown, the method of compounding has little effect.
n 
FP 
1 (yearly) 
$ 10600.00 
2 (semiannually) 
$ 10609.00 
4 (quarterly) 
$ 10613.64 
12 (monthly) 
$ 10616.78 
52 (weekly) 
$ 10618.00 
365 (daily) 
$ 10618.31 
continuous 
$ 10618.37 

