 Using a Compound Interest Calculator When it comes to compound interest, it means that the interest is paid not just to principal balance of your account but to other interest it has accumulated previously. Compound interest can produce massive gains onto your investment over a long period time. This is actually among the many reasons why this concept of investment has become something that numerous investors are so eager and interested to understand. Whether you believe it or not, there are many ways to which interests can be calculated and these are simple and compound. With regards to simple calculation of interest, it’s easier to be done because like what the name suggests, simple interest indicates that the principal balance is what being calculated. Having said that, in order to calculate the simple interest, you only need to multiply your rate of interest by the number of years that you consider and the principal balance too. As a quick example to how simple interest calculation works, say that you have bought a bond for 1000 dollars that pays 5 percent simple interest for 30 years, you are going to receive 50 dollars annually for the next 30 years as interest payment, which is a total of 1500 dollars in interest. With regards to simple interest, the interest will stay the same year after year.