Compound interest: instructions and assumptions
Understand your inputs, results and the assumptions behind the calculation.
What does this calculator show?
It separates projected assets from contributions, assuming an initial investment and monthly deposits grow at a constant return. It is a planning tool for comparing time, savings and returns, not a prediction of actual product performance.
Inputs and assumptions
- Initial investment: a lump sum invested at the start.
- Monthly contribution: money added at each month-end. Enter zero for no recurring deposits.
- Expected return: choose daily, weekly, monthly or annual, then enter the return for that period. Even the same 1% gives different results depending on the selected period.
- Investment horizon: enter years. 0.5 years means six months; the total must equal a whole number of months.
k: daily = 365/12, weekly = 365/(7×12), monthly = 1, annual = 1/12
Balance after n months = P × (1+i)^n + M × ((1+i)^n − 1) ÷ i
When i is zero: P + M × n
P is the initial investment and M the month-end contribution. Daily rates use 365 calendar days per year; weeks use seven days. Trading days and leap years are not modeled. Returns accrue before each month-end deposit. Displayed KRW amounts are rounded at the end. Daily and weekly conversion uses fractional periods at a constant assumed return.
Example: KRW 10 million upfront and KRW 500,000 monthly
With an annual rate of 7%, KRW 10 million initially, KRW 500,000 monthly and 10 years, contributions total KRW 70 million and projected assets are about KRW 105,197,379. The difference, about KRW 35,197,379, is the projected investment gain. At 0%, assets equal contributions.
Entering daily, weekly and monthly returns
For 0.1% daily, choose daily and enter 0.1. For 1% weekly or monthly, select that period and enter 1. Changing the period does not convert the number automatically. A monthly 1% is about 12.68% annually, not 1% annually. Sustaining high short-period returns over many years can be unrealistic.
Reading the results carefully
The chart is smooth because it assumes a constant return. Actual stock returns vary and can be negative. Tax, fees and inflation are excluded, so the balance is not your future purchasing power. Compare several scenarios, including lower-return assumptions.
Does 7% annually guarantee 7% every year?
No. It is only the assumption you enter. Even with the same annualized return, actual results depend on price movements and contribution timing.
What if I contribute at the start of the month?
Each payment would be invested for one more month. With positive returns, the result would be higher than for month-end contributions. This calculator consistently uses month-end deposits.
Related reading: Compound growth vs. average annual return