C# program to calculate compound interest

Compound interest is interest calculated on the initial principal amount plus all previously earned interest. Unlike simple interest, compound interest grows exponentially because the interest itself earns interest in subsequent periods. In this article, we will explore how to calculate compound interest using C#.

What is Compound Interest?

Compound Interest is the interest that calculates interest on both the initial principal and the accumulated interest from previous periods. This compounding effect causes the investment to grow at an accelerating rate over time.

Formula

The compound interest formula is

Amount = Principal × (1 + Rate/100)^Time
Compound Interest = Amount - Principal

Where

• Principal: Initial amount invested
• Rate: Annual interest rate (as percentage)
• Time: Number of years

Using Formula-Based Approach

The most efficient way to calculate compound interest is using the mathematical formula with Math.Pow() function

using System;

class Program {
    static void Main(string[] args) {
        // Input values
        double principal = 20000;
        double rate = 10;
        double time = 3;

        // Calculate amount using compound interest formula
        double amount = principal * Math.Pow((1 + rate / 100), time);

        // Calculate compound interest
        double compoundInterest = amount - principal;

        // Display results
        Console.WriteLine("Principal Amount: ${0}", principal);
        Console.WriteLine("Rate of Interest: {0}%", rate);
        Console.WriteLine("Time Period: {0} years", time);
        Console.WriteLine("Final Amount: ${0:F2}", amount);
        Console.WriteLine("Compound Interest: ${0:F2}", compoundInterest);
    }
}

The output of the above code is

Principal Amount: $20000
Rate of Interest: 10%
Time Period: 3 years
Final Amount: $26620.00
Compound Interest: $6620.00

Using Iterative Approach

We can also calculate compound interest iteratively by applying the interest year by year. This approach helps understand how interest compounds over time

using System;

class Program {
    static void Main(string[] args) {
        // Input values
        double principal = 3000;
        double rate = 5;
        int time = 2;

        double amount = principal;
        
        Console.WriteLine("Year-by-year breakdown:");
        Console.WriteLine("Year 0: ${0:F2}", amount);

        // Calculate interest for each year
        for (int year = 1; year <= time; year++) {
            double yearlyInterest = amount * (rate / 100);
            amount += yearlyInterest;
            Console.WriteLine("Year {0}: ${1:F2} (Interest: ${2:F2})", 
                            year, amount, yearlyInterest);
        }

        double compoundInterest = amount - principal;
        Console.WriteLine("\nFinal Compound Interest: ${0:F2}", compoundInterest);
    }
}

The output of the above code is

Year-by-year breakdown:
Year 0: $3000.00
Year 1: $3150.00 (Interest: $150.00)
Year 2: $3307.50 (Interest: $157.50)

Final Compound Interest: $307.50

Comparison of Approaches

Conclusion

Compound interest can be calculated efficiently using the mathematical formula with Math.Pow(), or iteratively for a detailed year-by-year breakdown. The formula-based approach is preferred for performance, while the iterative method helps visualize how interest compounds over time.