Formulas & Methodology

Compound Interest Formula & Assumptions

Reviewed by • Last Updated: July 9, 2026

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We believe in total transparency. This page outlines the exact mathematical formulas, standard financial assumptions, and data sources powering this calculator.

The Mathematics of Growth

Our compound interest calculator uses the standard future value formula for compound interest with regular contributions:

FV = P(1 + r/n)^(nt) + PMT * [((1 + r/n)^(nt) - 1) / (r/n)]

Variables Explained

P = Principal amount (initial investment)
r = Annual interest rate (decimal)
n = Number of times interest is compounded per year
t = Time in years
PMT = Regular contribution amount

Default Assumptions

Unless altered by the user, the calculator assumes an inflation-adjusted return of 7% (representing the historical S&P 500 average after inflation). All contributions are assumed to be made at the end of the compounding period.