A compound interest calculator shows how an investment grows with time at a compound interest rate. You need three inputs to calculate the compound interest; principal amount, interest rate, and Period for which the money is invested.
Compound interest is the interest on interest. The interest you earn on the deposit will be reinvested instead of paying it out. In simple terms, if you have investment Rs.100000 for 3 years and you will get a compounding benefit every quarter, then your money will be reinvested every quarter with an earned interest in last months.
Suppose interest rate of your investment is 12% p.a, you will receive 1% monthly interest on Rs.100000 in the initial three months of your investment. After thee months (Quarter), you investment will be reinvested will the earn interest (Rs.100000 + 3000) and you will starting receiving 1% monthly interest on Rs. 103000, after two quarters interest will be occur on Rs.106003 and It will go on until the maturity.
Standardised Folmula to calculate the total compound interest accrued is below:
A = P (1 + R/N) ^ nt
Suppose you have invested Rs. 20000 for 5 years. You earn 10% interest on your investment and your interest gets compounded annually.
So, in the first year you earn Rs.20000 on your investment of Rs.200000. In the second year, your principal amount changes to Rs.220000. You now earn Rs.22000 as interest on your new principal amount, so you now have a total of 220000 + 22000 = 242000. By using the above formula, you can easily understand the calculation of the coming years.
A = 200000 (1 + 10/1) ^ 5 = 322000
Steps to use the compound interest calculator:
Formula of Simple interest = (P × T × R) ⁄ 100
Formula of the Compounding Interest = P (1 + R/N) ^ nt
If, Rs.10000 will be deposited for 5 years at a Simple interest rate of 8% p.a, so the maturity amount will be Rs.140,000. If we apply the same condition only the interest will be compounded with yearly frequency, so the maturity amount will be Rs.1,46,932.