Compound interest
Separate what you contribute from what compounding adds, and inspect every year of the projection.
By the SterlingCat editorial team · Last updated 2026-08-02 · Calculated in your browser
The key points
- Compounding frequency changes annual percentage yield even when the nominal annual rate stays the same.
- Beginning-of-month contributions receive one more month of interest than end-of-month contributions.
- The rate is a constant scenario assumption; taxes, fees, and changing returns are not modeled.
How we calculate this
The annual percentage yield is (1 + nominal rate ÷ compounds per year)compounds per year − 1. The model converts that yield to an equivalent monthly rate, applies it each month, and adds the contribution at the selected point in the month.
Nominal rate and annual percentage yield
The nominal annual interest rate does not include the effect of intra-year compounding. Annual percentage yield does. When comparing a result with an account disclosure, make sure you enter the type of rate the field requests.
Interpreting the result
The chart is a deterministic scenario, not a probability range or forecast. A variable investment return will not follow the smooth line shown here. Replace the illustrative starting rate with an assumption appropriate to the scenario you want to test.
Sources
Grounded in authoritative primary sources:
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