What is the difference between simple and compound interest?

Simple interest calculates returns solely on the original principal. Compound interest calculates returns on the principal plus previously accumulated interest, yielding exponential growth.

What compounding frequency yields the highest return?

More frequent compounding yields higher returns. Daily compounding is slightly better than monthly, which beats quarterly and annual compounding.

APR represents the annual interest rate without compounding. APY is the effective annual rate that incorporates compounding, making it higher than APR.

What is the Rule of 72?

A mental shortcut to estimate investment doubling time: divide 72 by the annual interest rate. At 6%, money doubles in about 12 years (72 ÷ 6).

Compound Interest Calculator — Exponential Growth Tool

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