A Compound Interest Calculator is a financial tool used to calculate the growth of an initial investment or loan based on compound interest. Compound interest is the interest calculated on the initial principal and the accumulated interest from previous periods.
The calculator simplifies complex calculations by providing results based on inputs like:
- Principal Amount (P): The starting amount of money invested or borrowed.
- Interest Rate (r): The annual percentage rate of interest.
- Time Period (t): The duration of the investment or loan, typically in years.
- Compounding Frequency (n): The number of times interest is compounded per year (e.g., annually, semi-annually, quarterly, monthly, or daily).
Formula Used:
The formula for compound interest is:A=P×(1+rn)n×tA = P \times (1 + \frac{r}{n})^{n \times t}A=P×(1+nr)n×t
Where:
- AAA = Future Value (the total amount after interest)
- PPP = Principal amount
- rrr = Annual interest rate (in decimal form)
- nnn = Number of compounding periods per year
- ttt = Time in years
How It Works:
- Input Fields: The user enters values for the principal, interest rate, time period, and compounding frequency.
- Calculation: The calculator applies the formula to compute the future value and sometimes also shows the total interest earned.
- Results: It displays how the investment or loan will grow over time with compound interest.
Uses:
- For Investors: To estimate returns on savings, fixed deposits, or investments.
- For Borrowers: To understand the growth of debt over time if interest compounds on loans.
- For Financial Planning: To compare different savings or loan products