Calculate Compound Interest
Results:
Total Amount (Principal + Interest): ₹
Compound Interest Earned: ₹
What is Compound Interest?
Compound interest is the interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, compound interest grows over time, which can significantly increase the value of your investments.
Why Use a Compound Interest Calculator?
This tool helps you understand how your money grows over time with compound interest. It provides a quick estimate of your future investment value, allowing you to make informed decisions about your finances.
How is Compound Interest Calculated?
The compound interest formula is:
A = P(1 + r/n)^(nt)
Where:
- A is the total amount (principal + interest).
- P is the principal amount.
- r is the annual interest rate (decimal).
- n is the number of times interest is compounded per year.
- t is the time the money is invested or borrowed for, in years.
Types of Compounding Frequencies
- Annual Compounding: Interest is compounded once a year.
- Quarterly Compounding: Interest is compounded four times a year.
- Monthly Compounding: Interest is compounded twelve times a year.
- Daily Compounding: Interest is compounded every day.
Frequently Asked Questions (FAQs)
How does compounding frequency affect interest?
The more frequently interest is compounded, the greater the amount of interest you will earn. For example, daily compounding results in more interest than monthly or annual compounding for the same rate and time period.
Can I calculate compound interest for any investment?
Yes, this calculator can be used for various investments such as savings accounts, fixed deposits, or any financial instrument that offers compound interest.
What is the difference between compound interest and simple interest?
Simple interest is calculated only on the principal amount, whereas compound interest is calculated on both the principal and the accumulated interest. Over time, compound interest results in more earnings than simple interest.