Compound Interest Calculator
Compounding interest, as opposed to simple interest, is the method whereby your wealth increases exponentially because you earn interest on your total investments, the aggregation of your principal amount and the interest it incurs.
How to use Compound Interest calculator?
The Compounding Interest Calculator asks the user to enter the following four inputs:
- Principal Amount: The amount one wishes to deposit for a stated tenure.
- Expected Rate of Interest (per annum): The interest rate one can expect on the invested amount during the tenure of the investment.
- Time Period (In Yrs): The number of years for which the user's money will stay invested.
- Compounding Frequency: The compounding takes place at the stated frequency. Generally, most financial products offer an annual compounding rate of interest. However, some financial institutions offer half-yearly/quarterly compounding of interest as well. The higher the compounding frequency, the greater the return on investment.
The Compounding Interest Calculator generates the following output for the user:
- Total Invested: It lets the user know how much money they invested as the principal amount during the investment period.
- Interest Earned: It generates how much interest income was added to the investor's portfolio on account of invested money.
- Total Value of Investment: It shows the value of the investor's portfolio after the tenure of the investment. It includes the principal invested and interest earned thereon.
It calculates the interest amount based on the compound interest frequency chosen by the user. All the interest payments are considered as received at the end of the period.