Simple and Compound Interest Calculator

Simple and compound interest formulas

In textbook notation: P = principal, r = yearly rate as a decimal (10% = 0.10), n = years.

• Simple interest I = Pnr, and the amount A = P + I = P(1 + nr).
• Compound amount C = P(1 + r)ⁿ, and the compound interest is C − P.

A textbook-style example

৳200 at 10% for 3 years:

1. Simple interest = 200 × 3 × 0.10 = ৳60; the amount is ৳260.
2. Compound amount = 200 × (1.10)³ = 200 × 1.331 = ৳266.20; compound interest ৳66.20.
3. The difference is ৳66.20 − ৳60 = ৳6.20, because from the second year interest is also earned on interest.

Example: ৳1,00,000 at 9% for 5 years

The amount at the end of each year, simple and compounded yearly:

Over 5 years simple interest is ৳45,000 and compound interest ৳53,862.40, a difference of ৳8,862.40. The two are equal after the first year, and the gap grows every year after that.

How often interest is compounded

Compounded m times a year, C = P(1 + r/m)^(m × n). The same ৳1,00,000 at 9% for 5 years earns:

• Yearly (m = 1): ৳53,862.40
• Half-yearly (m = 2): ৳55,296.94
• Quarterly (m = 4): ৳56,050.92
• Monthly (m = 12): ৳56,568.10

The more often interest is compounded, the more you earn. 9% compounded monthly works out to about 9.38% a year; the calculator shows this as the “effective yearly rate”.

Finding the rate, time or principal

Rearrange the simple interest formula to find the unknown:

• Rate r = I ÷ (P × n). If ৳200 earns ৳60 in 3 years, r = 60 ÷ 600 = 0.10, which is 10%.
• Time n = I ÷ (P × r).
• Principal P = I ÷ (n × r).

The Percentage Calculator helps turn percentages into decimals and back.

Common mistakes

• Multiplying by the rate as a whole number. In the formula r is a decimal: 9% is 0.09, not 9. In the calculator, just enter 9.
• Not turning months into years. 18 months is 1.5 years; enter 1.5 as the time.
• Assuming compound interest is the same every year. Each year’s compound interest is more than the year before.

Bank FDRs, DPS and loans

Banks set their own rate and compounding, and deduct source tax from interest. For figures with the tax, use the FDR Calculator and the DPS Calculator. For a loan’s monthly instalment, use the EMI Calculator.

How to use the calculator

1. Enter the principal. Bangla digits and 1,00,000-style grouping both work.
2. Enter the yearly interest rate as a percentage, e.g. 9.
3. Enter the time in years; fractions work, e.g. 2.5.
4. Choose how often interest is compounded; textbook problems use “Yearly”.
5. Select Calculate interest to see simple and compound interest, the amounts, the difference and a year-by-year table.