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Simple interest is calculated only on the initial amount (principal) that you invest. The formula for simple interest is:

I = P × r × t

Where:

• I = Interest earned
• P = Principal amount
• r = Annual interest rate (decimal)
• t = Time period (years)

For example, if you invest $1,000 at an annual rate of 5% for 3 years, the simple interest would be $1,000 × 0.05 × 3 = $150.

Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. This means you earn interest on interest. The formula for compound interest is:

A = P(1 + r/n)^(nt)

Where:

• A = the future value of the investment/loan, including interest
• P = the principal investment amount
• r = the annual interest rate (decimal)
• n = the number of times that interest is compounded per year
• t = the time the money is invested or borrowed for, in years

For example, if you invest $1,000 at an annual rate of 5% compounded annually for 3 years, the future value would be $1,000(1 + 0.05)^3 = $1,157.63. The compound interest earned is $1,157.63 - $1,000 = $157.63.

Making regular additional contributions can significantly boost your investment growth over time due to the power of compounding. By adding to your initial investment regularly, you increase the principal amount on which interest is calculated, leading to exponential growth.

For example, if you invest $10,000 initially with an annual interest rate of 5% compounded monthly, after 10 years you would have approximately $16,470. However, if you also contribute $100 monthly, your total balance after 10 years would be approximately $30,337. The additional contributions of $12,000 over the 10 years result in an extra $13,867 in interest earnings.

Compounding frequency refers to how often the interest is calculated and added to the principal. Common compounding frequencies include annually, semi-annually, quarterly, monthly, and daily. The more frequently interest is compounded, the greater the overall return on your investment.

For example, $10,000 invested at 5% annual interest for 10 years would yield:

• Annually: $16,288.95
• Semi-annually: $16,386.16
• Quarterly: $16,436.19
• Monthly: $16,470.09
• Daily: $16,486.65

As you can see, more frequent compounding results in higher returns due to the effect of earning "interest on interest" more often.

This calculator provides accurate estimates based on the information you provide. However, it's important to note that actual investment returns may vary due to factors such as changes in interest rates, fees, taxes, and market fluctuations.

The calculator assumes that:

• The interest rate remains constant over the entire investment period
• Additional contributions are made at the end of each period (unless specified otherwise)
• There are no taxes or fees deducted from the investment

This tool is intended for educational and illustrative purposes only. For precise financial planning, consult with a qualified financial advisor.