Let's refer to an example to understand the calculation in a better way. In the above formula, P denotes the principal amount, r denotes the annual interest rate, n represents the compounding frequency (number of times the interest is compounded) in a year, and t means the number of years. Compound interest is calculated using the following formula: To calculate principal and interest, the compound interest calculator employs the compound interest formula. But what if the tenure is longer? For this, the compound interest is calculated for any given interest and term using a formula. Since the example was for three years, it was easy to compute. At maturity, you will get Rs.133100 as the maturity amount. Continuing this pattern, in the third year, the principal will be Rs.121000, and interest will be Rs.12100. For the first year, the interest will be Rs.10000 (100000*10%) on the principal Rs.100000. Say you have Rs.100000, and you are investing it for three years at 10% per annum compounded annually. You can understand the calculation of compound interest with this simple example. The compound interest calculator displays the results as the maturity amount at the end of investment tenure. You will have to input the principal amount, the frequency of compounding, your investment tenure, and the expected rate of return. The compound interest calculator online works on the compound interest formula. You can also use the compound interest calculator to see how different interest rates and loan lengths affect the amount of compounded interest you'll pay on a loan. The compound interest calculator shows you how your money can grow by compounding interest. The most common compounding frequencies are daily, weekly, monthly, quarterly, half-yearly, and annually. The number of times interest is calculated in a year is known as compounding frequency. Loans, deposits, and investments are all subject to compounding. Compound interest is when the principal includes the accumulated interest from previous periods, and the following interest is calculated on this. If we summarize the idea in simple terms, compound interest is interest on interest. The concept of compounding is compelling. He who understands it earns it, and he who doesn't pays it." Famous scientist Albert Einstein once famously said that "Compound interest is the 8th wonder of the world.
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