Compound Interest Calculator
Compound interest Calculator. It is simply the interest earned on interest. You earn compound interest when you earn interest on not only the original principal amount invested as well as the interest that accumulates on such principal.
For example, say you invested ₹100 in a bond or fixed deposit that pays 5% interest per annum. At the end of 1 year, the amount due to you will be ₹105. However, when the interest is calculated the next year, it will be calculated on ₹105 and not ₹100. Hence, you shall earn interest on both ₹100 (principal) and ₹5 (the interest earned), taking the value of your investment to ₹110.25. And so on, for every consecutive year till you remain invested. This is called compound interest.
When the amount invested is large and the time period is longer, the calculation for interest can become a little complicated, and that is where a compound interest calculator is useful.
How Compound Interest Calculator Help You?
The nature of compound interest makes it extremely lucrative for businesses. When you use a compound interest calculator online, you can avail the following benefits.
It helps you determine an accurate figure and percentage of returns over a certain time frame.
A reliable calculator helps you identify how much investment you might need over a time frame. The required corpus of funds can then be arranged with convenience.
Sharemint offers you a customizable compound interest rate calculator which helps you assign values based on your requirements.
A Compound Interest Calculator helps calculate the total returns as well as yearly returns in case you need to consider breaking such an investment as per your future financial planning. If so, it is also advisable to consider pre-closure charges of the investment corpus.
To keep deposit rates in line with the market, the Indian Government decided to annualize the interest rates on National Savings Certificates. The changes were effected in 2016. To determine how much your savings schemes now work, you must use an online calculator.
How Compound Interest Works ?
An online compound interest calculator uses the compound interest formula to calculate the total interest. The formula has three variables:
- Principal (P)
- Rate (R)
- Compounding Frequency (N)
Here, N represents the total number of times that compounding occurs over a given time period. For instance, if you’ve made an investment for 10 years and the compounding frequency is half-yearly, N will be 20 (i.e., 10 years x 2 times/year).
The N is important because the compounding frequency may differ from one investment to another. When you input the required number in the compound interest calculator, the algorithm will do the math for you and display the total interest you’ll earn over the investment’s holding period.