Compound interest vs simple interest vs CAGR vs inflation

Compound Interest Calculator

You want a future value when interest is added on a schedule from yearly through daily.

If interest is not compounded, use simple interest. If you already know the start and end values, use CAGR.

Example. 10,000 at 5% compounded monthly for 3 years grows to 11,614.72. Interest earned is 1,614.72.

Simple Interest Calculator

You want I = P × R × T with no compounding.

It will not match a compound-interest result. Use compound interest when the balance earns interest on prior interest.

Example. 10,000 at 5% for 3 years earns 1,500. The total is 11,500, which is lower than the monthly-compounding example above.

CAGR Calculator

You know a starting value, an ending value, and the number of years, and you want the annualized rate between them.

CAGR does not project a future balance. Use compound interest when the unknown is the future value.

Example. A value that moves from 10,000 to 13,310 over 3 years has a CAGR of 10%. That describes the past span you entered.

Inflation Calculator

You want to see a constant inflation rate change a sum’s future price level and today’s purchasing power.

It is not a CPI series and not a forecast. Use compound interest when the rate is a return on principal.

Example. 100 at 3% inflation for 10 years has a future price level of 134.39. The same 100 then buys what 74.41 buys today.

Why is compound interest higher than simple interest on the same inputs?

Compound interest adds each period’s interest back into the balance. Simple interest charges the original principal only.

Is CAGR a prediction?

No. It is the constant annual rate that connects a start value you enter to an end value you enter.