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Compound Interest Principal Calculator

Work backward from a target future value, annual rate, and number of years to find the principal you need to invest today. Supports annual, semiannual, quarterly, and monthly compounding, and also shows the interest earned and effective annual rate.

Input

$
%
yr
Compounding frequency

Result

Principal needed today (3% / 10 yr)

$744,093.91

Target future value

$1,000,000.00

Interest earned

$255,906.09

Effective annual rate

3.00 %

How it works

  • Enter the target future value, annual rate (nominal), number of years, and compounding frequency, and the required principal is found with: principal = future value / (1 + r/m)^(m x n), where r is the annual rate, m is the number of compounding periods per year, and n is the number of years.
  • Compounding frequency can be set to annual (1x), semiannual (2x), quarterly (4x), or monthly (12x). The rate per period is the annual rate r divided by m, i.e. r/m.
  • Interest earned is calculated as future value minus the required principal, shown as the growth added on top of your principal through compounding.
  • The effective annual rate reflects the impact of compounding on the real yearly return and is calculated as (1 + r/m)^m - 1. The more frequent the compounding, the higher the effective rate is compared with the nominal rate.
  • When the annual rate is 0%, the principal equals the future value and the interest is zero. Displayed amounts are rounded approximations, and rates are shown to up to 6 decimal places.
  • Note: this tool uses a simple compounding model that ignores taxes, fees, rate changes, and inflation. It does not guarantee actual investment outcomes or the amount of capital required.