💰 Compound Interest Calculator
Result will appear here…
📌 Understanding Compound Interest
Compound interest is calculated using the formula:
- A = P (1 + R / N)^(N × T)
- Where:
- P = Principal amount
- R = Annual interest rate (as a decimal: percentage/100)
- N = Number of times interest is compounded per year
- T = Time in years
📌 Example Calculations
| Principal (P) | Rate (R%) | Time (T) Years | Compounds per Year (N) | Final Amount (A) |
|---|---|---|---|---|
| $1,000 | 5% | 2 | 4 | $1,104.94 |
| $5,000 | 4% | 3 | 12 | $5,638.79 |
| $10,000 | 6% | 5 | 2 | $13,489.08 |
🔧 Practical Applications of Compound Interest
1. Investments & Savings: Helps estimate future value of savings accounts and investment portfolios.
2. Loans & Mortgages: Determines the total amount owed over time with accumulated interest.
3. Financial Planning: Essential for retirement planning and long-term wealth accumulation.
❓ FAQs
Q1: How do I calculate compound interest?
✅ Use the formula A = P (1 + R / N)^(N × T)
Q2: What is the difference between simple and compound interest?
✅ Simple interest is calculated only on the principal, whereas compound interest is calculated on both the principal and accumulated interest.
Q3: Can compound interest be negative?
✅ No, unless the interest rate is negative.
Q4: Where is compound interest commonly used?
✅ It is widely used in investments, loans, and financial forecasting.
Q5: Why is compound interest important?
✅ It helps in understanding how money grows over time through reinvestment.