Simple vs compound

Compare annual balances under simple interest and annual compounding for the same principal and rate.

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Calculation specification

Reviewed on:

Formula basis

At year t, simple balance=PV×(1+r×t), compound balance=PV×(1+r)^t, and difference=compound−simple.

Calculation method

Compares year-end balances under simple interest and annual compounding for the same principal and annual rate.

Exclusions and checks required

  • Compounding is annual and the rate is constant; partial years are unsupported.
  • Tax, fees, cash flows, changing rates, and inflation are excluded.

Example input:：Comparing JPY 1 million at 5% for 20 years

principal
1000000
annualRate
5
years
20

This compares two theoretical formulas, not investment products.

FAQ

Who is this calculator for? Simple vs compound

Compare annual balances under simple interest and annual compounding for the same principal and rate.

What values should I enter?

Applies to: Compound interest / Simple: PV×(1+r×n) / Compound: PV×(1+r)^n

How should I interpret this estimate?

Compares year-end balances under simple interest and annual compounding for the same principal and annual rate.

How to use

  1. Enter your input values and press Calculate.
  2. Review the result and compare it with expected context.
  3. At year t, simple balance=PV×(1+r×t), compound balance=PV×(1+r)^t, and difference=compound−simple.