Compound Interest: The future value (FV) of an investment of present value (PV) dollars earning interest at an annual rate of r compounded m times per year for a period of t years is: Show
FV = PV(1 + r/m)mtor FV = PV(1 + i)n where i = r/m is the interest per compounding period and n = mt is the number of compounding periods. One may solve for the present value PV to obtain: PV = FV/(1 + r/m)mt Numerical Example: For 4-year investment of $20,000 earning 8.5% per year, with interest re-invested each month, the future value is FV = PV(1 + r/m)mt = 20,000(1 + 0.085/12)(12)(4) = $28,065.30 Notice that the interest earned is $28,065.30 - $20,000 = $8,065.30 -- considerably more than the corresponding simple interest. Effective Interest Rate: If money is invested at an annual rate r, compounded m times per year, the effective interest rate is: reff = (1 + r/m)m - 1. This is the interest rate that would give the same yield if compounded only once per year. In this context r is also called the nominal rate, and is often denoted as rnom. Numerical Example: A CD paying 9.8% compounded monthly has a nominal rate of rnom = 0.098, and an effective rate of: r eff =(1 + rnom /m)m = (1 + 0.098/12)12 - 1 = 0.1025. Thus, we get an effective interest rate of 10.25%, since the compounding makes the CD paying 9.8% compounded monthly really pay 10.25% interest over the course of the year. Mortgage Payments Components: Let where P = principal, r = interest rate per period, n = number of periods, k = number of payments, R = monthly payment, and D = debt balance after K payments, then R = P � r / [1 - (1 + r)-n] andD = P � (1 + r)k - R � [(1 + r)k - 1)/r] Accelerating Mortgage Payments Components: Suppose one decides to pay more than the monthly payment, the question is how many months will it take until the mortgage is paid off? The answer is, the rounded-up, where: n = log[x / (x � P � r)] / log (1 + r) where Log is the logarithm in any base, say 10, or e.Future Value (FV) of an Annuity Components: Ler where R = payment, r = rate of interest, and n = number of payments, then FV = [ R(1 + r)n - 1 ] / r Future Value for an Increasing Annuity: It is an increasing annuity is an investment that is earning interest, and into which regular payments of a fixed amount are made. Suppose one makes a payment of R at the end of each compounding period into an investment with a present value of PV, paying interest at an annual rate of r compounded m times per year, then the future value after t years will be FV = PV(1 + i)n + [ R ( (1 + i)n - 1 ) ] / i where i = r/m is the interest paid each period and n = m � t is the total number of periods. Numerical Example: You deposit $100 per month into an account that now contains $5,000 and earns 5% interest per year compounded monthly. After 10 years, the amount of money in the account is: FV = PV(1 + i)n + [ R(1 + i)n - 1 ] / i =
Value of a Bond: V is the sum of the value of the dividends and the final payment. You may like to perform some sensitivity analysis for the "what-if" scenarios by entering different numerical value(s), to make your "good" strategic decision. Replace the existing numerical example, with your own case-information, and then click one the Calculate. Compounding interest, as opposed to simple interest, is the situation where your wealth increases exponentially because you earn interest on your total investments, the aggregation of your principal amount and the interest it incurs. Mathematically, the possibilities of compound interest are endless. Most of the modern business thrives on it. One needs a reliable compound interest calculator to ensure they are receiving the right ROI. How can a 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.
How to Calculate Compound Interest?Groww uses a globally standardized method to determine the total compound interest accrued. The formula is – A = P (1 + r/n) ^ nt The variables in the formula are the following.
For example, if you invest Rs. 50,000 with an annual interest rate of 10% for 5 years, the returns for the first year will be 50,000 x 10/100 or Rs. 5,000. For the second year, the interest will be calculated on Rs. 50,000 + Rs. 5000 or Rs. 55,000. The interest will be Rs. 5550. For the third year, the amount will stand at Rs 6055 and so on. Obviously, it is difficult to calculate these amounts manually. That is why you need a compound interest calculator in India to make the task easier. How to Use Groww’s Compound Interest Formula Calculator?Using Groww’s calculator is easy when you remember these easy steps.
Advantages of using Groww’s compound interest calculatorGroww provides you with an accurate compound interest calculator for unlimited use. Groww is ideal for daily use thanks to –
Besides the compound interest calculator, you can also use a wide range of other calculators as seen below. Each one of our calculators is benchmarked against the best in the business and is ideal for everyday use.
In what time will ₹ 6000 amount to ₹ 6615 at 5% per annum compounded annually?At 5% per annum the sum of Rs 6,000 amounts to Rs 6,615 in 2 years when the interest is compounded annually.
At what rate of interest per annum ₹ 600 will become ₹ 661.50 in 2 years the interest being compounded annually?Thus; The rate of the compound Interest will R = 5% .
At what rate per cent per annum will 6000 amount to 6615 in 2 years when interest is compounded annually 10 at what rate per cent compound interest does?⇒ R = 5 % p.a.
At what rate percent compound interest does a sum of money becomes 1.44 times?A sum becomes 1.44 times of itself. ∴ The rate of interest is 20%.
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