compound interest vs simple interest

The Compound Interest vs Simple Interest Calculator compares growth on the same principal, annual rate, and term.

Formulas

Simple interest: A = P(1 + rt). Compound interest: A = P(1 + r/n)^(nt), where P is principal, r is the annual decimal rate, n is compounds per year, and t is years.

Example

At 6% for 5 years, $10,000 grows to$13,000 with simple interest. Monthly compounding produces about $13,488.50. The difference grows with time, rate, and compounding frequency.

Limitations

The comparison excludes fees, taxes, withdrawals, and changing rates. It assumes interest is reinvested and compounding occurs on schedule.