Compound Interest Calculator

Principal Amount (₹)

Interest Rate (%)

Time Period (Years)

A compound interest calculator is a tool that calculates the compound interest earned on an initial amount over a specified period. Compound interest is a method of calculating interest where the interest earned is added to the principal at the end of each compounding period, allowing the interest to earn additional interest in subsequent periods. This is known as “compounding.”

The formula for calculating compound interest is:

$A = P \times (1 + r/n)^{n \times t}$

Where:

A is the future value of the investment or loan, including interest.
P is the principal amount or initial investment.
r is the annual interest rate (in decimal form). For example, if the interest rate is 5%, use 0.05 as the value of $r$ .
n is the number of times that interest is compounded per year.
t is the time the money is invested or borrowed, usually in years.

Features of a Compound Interest Calculator

Input Fields: Typically, a compound interest calculator will have fields to input the principal amount (P), the annual interest rate (r), the number of compounding periods per year (n), and the time period in years (t).
Calculate Button: The calculator will have a button to trigger the calculation based on the inputs provided.
Results: Once the calculation is complete, the calculator will display the future value of the investment or loan (A) and the total interest earned.

Applications of a Compound Interest Calculator

Investments: It can be used to calculate the future value of investments such as stocks, mutual funds, or savings accounts where compound interest is applied.
Loans: It can be used to calculate the future value of loans where compound interest is applied.
Financial Education: It serves as a teaching tool to help people understand how compound interest works and the potential benefits of investing with compounding.

Example

Let’s use a compound interest calculator with an example:

Principal (P): INR 10,000
Annual Interest Rate (r): 5% or 0.05
Number of compounding periods per year (n): 4 (quarterly)
Time (t): 2 years

Using the formula:

$A = 10, 000 \times (1 + 0.05/$ 4)^ 4 × 2

$A = 10, 000 \times (1.0125) ^^{8}$

$A = I NR 11, 049.50$

So, the future value of an investment of INR 10,000 over 2 years at an interest rate of 5%, compounded quarterly, would be INR 11,049.50.

A compound interest calculator can quickly automate this calculation and provide the future value and total interest earned over the specified period.