COMPOUND INTEREST CALCULATOR

 

 

 
COMPOUND INTEREST
Bank Based Stock Brokers

Compound Interest Calculator

You must have come across compound interest calculators online. Probably, you have wondered if it could ever be of any use to you. It certainly is of help and let’s find how.

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Let us first understand how interest works. With an understanding of interest, you can estimate the returns on your money. It lets you plan for the future and compare different investment avenues. There are two basic kinds of interest – simple and compound.

Simple interest is the fixed interest paid on your capital. When you invest Rs 10,000 into something, and the interest rate is 10 per cent, the simple interest for a year will be Rs 1,000. 

However, people generally invest money for more than a year. If you invest for three years, the interest earned at the end of each year is added to the Principal and reinvested. Let’s say you invest Rs 10,000. You will earn interest of Rs 1,000 by the end of that year. By the end of the second year, you will earn interest on the Original Principal + Interest Earned in the First Year, or on Rs 11,000. Your interest would be 10 per cent of this amount, or Rs 1,100. This amount will be added in the third year to the Principal and become Rs 12,100. When the third year ends, you will earn 10 per cent of this, or Rs 1,210. This is called compound interest. A compound interest calculator gives you the result in a few clicks.

How to calculate compound interest
Calculating compound interest can be daunting for someone who is not math-savvy. But, if you don’t know how to do it, you don’t need to break your head trying to figure it out. You can opt for a compound interest calculator online.
If you want to do it on your own, here are the steps:

Compound interest = [P (1 + r/n)nt] - P

P = Original principal
R = Rate of interest
N = Number of times compounding has taken place in a year
T = Time or duration of the investment

So, if you invest Rs 10,000 for five years at an interest rate of 10 per cent, the compound interest you get at the end of five years would be:

Rs [10,000(1+0.1)5] – Rs 10,000 = Rs 6,105.1
With so many compound interest rate calculators available online, you can do the math in no time at all. 

How to use it?
Using these calculators is pretty simple. Just enter the principal amount, the interest rate and the number of years you want to invest. There are other options too. For example, if interest is compounded monthly, there’s a monthly compound interest calculator. Banks in India generally do their compounding every quarter on their fixed deposits. So, if you are calculating returns from your bank FDs, make sure you enter the right compounding option, which is four. You can also use the calculator to find out how much your capital will be worth if you make regular additions to it over a specific time.

How a compound interest calculator India can help you

  • Discover the power of compounding: Small amounts can turn into a nice little nest egg because of the power of compounding. See how much your money can reap in a few years or when you retire.
  • Use it to set goals: Want to save money for the future? Use the compound interest calculator to find out how much you need to save each year.
  • Compare different investment avenues: You can use the calculator to compare returns from fixed deposits and equity over a given time.

Frequently Asked Questions

How do you calculate compound interest weekly?

The standard formula to calculate compound interest is the following. You can use it to calculate the weekly compounding return on your investment.

A = P(1 + r/n)nt

A= accrued amount (principal + interest)
P= principal amount
I= interest rate
R= annual national interest rate in percentage
r= yearly nominal interest rate in decimal (R/100)
t= time (duration for which the interest is calculated)
n= number of compounding periods for the time

You would need to adjust ‘n’ for the different time periods you want to calculate. For weekly compounding interest, n is 52.

The best alternative to manually calculating compounding interest is to use an online compound interest calculator.

How to use Compound Interest calculator?

You can use the Angel Broking compound interest calculator to calculate the compounded interest rate on your investment. It is a simple calculator that anyone can use – calculates the result based on the input given by you.

Input the following

  • Principal Amount
  • Rate of Interest
  • Time of investment
  • Frequency of compounding

The calculator will compute the result in a few seconds.

How does compound interest work?

Compounding interest works to your advantage by helping your investment grow exponentially. In compound interest, the interest amount calculated is added to the principal amount, and the next return is calculated on the new principal.

Let’s check with an example.

Suppose you have invested Rs1000 at the rate of 10 percent interest. At the end of the year your principal amount will stand at Rs1100 – Rs 1000 in principal and Rs 100 in interest. In the second year, the return will be calculated on the principal amount Rs 1100.

You can easily calculate the return on your investment at the end of the tenure using a monthly compound interest calculator.

How can I gain from compound interest?

A compounded interest investment has a steeper growth rate. In compound interest, the interest is added to the principal, helps it to grow. So in the next cycle, the interest is calculated on the new aggregated principal.

Compounding interest investments are great for building a nest egg for retirement or attaining financial independence. Calculate the yield on your compound interest investment using compound interest rate calculator.

How do you calculate compound interest on a deposit?

The formula to calculate compound interest is the following.

A = P(1 + r/n)nt

A= accrued amount (principal+interest)
P= principal amount
I= interest rate
R= annual national interest rate in percentage
r= annual nominal interest rate in decimal (R/100)
t= time (duration for which the interest is calculated)
n= number of compounding periods for the time

Use a simple online compound interest calculator to calculate compound interest on investment in a few seconds.

What are the frequencies in which compound interest is calculated?

Compound interest can be calculated for any frequency, daily, weekly, monthly, quarterly, half-yearly, or yearly. The higher the frequency of compounding, the greater will be the amount of interest.

What is the formula for calculating annually compounding interest?

Annually compounding interest is calculated using the following formula. To find the return on your investment, adjust the value of compounding period to one.

A = P(1 + r/n)nt

A= accrued amount (principal + interest)
P= principal amount
I= interest rate
R= annual national interest rate in percentage
r= annual nominal interest rate in decimal (R/100)
t= time (period over which the interest is calculated)
n= number of compounding periods for the time

A simple way to calculate compound interest is to use an online compound interest calculator.

How do you calculate interest compounded monthly?

To calculate the return on your monthly compounding investment, change the value of ‘number of the compounding periods’ to 12.

A = P(1 + r/n)nt

A= accrued amount (principal + interest)
P= principal amount
I= interest rate
R= annual national interest rate in percentage
r= annual nominal interest rate in decimal (R/100)
t= time (period over which the interest is calculated)
n= number of compounding periods for the time

Or, you can use Angel Broking monthly compound interest calculator and avoid all the hassle.

What's the difference between compound interest and simple interest?

The main difference between simple and compound interest deposits is that in case of simple interest deposits, the interest is calculated separately and not added to the principal amount. In compounding interest deposits, the interest accrued on the deposit is added to the principal and the compounded interest is calculated on the growing principal. As a result, compound interest gives a better return on investment than simple interest investments.

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