Explanation and example
Compound interest includes capitalization: interest from earlier periods increases the balance used for later interest. With the same nominal annual rate, more frequent compounding can produce a larger final amount.
For example, for 100,000 at 12% annual interest for 1 year with monthly compounding:
100000 × (1 + 12 / (100 × 12))^12 ≈ 112682.50
After 12 compounding periods, the future value is about 112,682.50 and interest earned is 12,682.50.
More examples
100,000 at 12% for 1 year, monthly → ≈ 112,682.50
50,000 at 10% for 2 years, quarterly → ≈ 60,920.14
80,000 at 7.5% for 3 years, annually → ≈ 99,383.75
30,000 at 0% for 1 year → 30,000
What is interest compounding?
It means adding earned interest to the balance so that later interest is calculated on the increased amount.
How does compounding frequency affect the result?
At the same nominal annual rate, more frequent compounding will usually increase the final amount because earned interest begins producing additional interest sooner.
How is this different from the Deposit calculator?
The LUKIK Deposit calculator uses simple interest without compounding. This calculator separately models compound interest with capitalization.
Can I enter the term in months?
Yes. Months are converted to a fraction of a year by dividing by 12.
Are taxes, fees or additional contributions included?
No. Version 1.0.0 models the growth of one initial amount using the selected rate and compounding frequency, without taxes, fees, contributions or withdrawals.
