compound interest calculator is an online interest calculation tool to find the time value of money based on the different compound interest formulas for monthly, quarterly, half-yearly and yearly based compounding frequencies. It provides the answers for the below queries
How much interest will be earned when lending money for compound interest for a certain period of time with a certain compounding frequency?
How much interest should be paid on the principal amount when money is borrowed or about to be borrowed for compound interest for a certain period of time with a certain compounding period?
Compound Interest
Compound Interest (CI) is the time value of money very similar to simple interest (SI) but the interest earned on principal will be added to the principal after a certain unit of time (compounding period or frequency), from that moment on, the interest will be paid both on the principal and on the interest that has been added to it. We can say it simply in other words that the interest earns itself interest. The principal amount, total period, compounding period or frequency and the interest rate are the major components of compound interest calculation.
Compound Interest (CI) Formulas
The below compound interest formulas are used in this context to find the total interest on principal for certain period of time with either monthly, quarterly, half-yearly or yearly compounding frequencies.
when the interest is compounded annually then the formula used to calculate the yearly compound interest is
when the interest is compounded semi-annually then the formula used to calculate the half-yearly compound interest is
when the interest is compounded quarterly then the formula used to calculate the Quarterly compound interest is
when the interest is compounded monthly then the formula used to calculate the monthly compound interest is
where
P denotes the Principal amount
R denotes the percentage of interest
n denotes the time in years or months
Principal Amount
It is a sum of money which is borrowed or lended or invested. In compound interest calculation, the Principal amount changes after every compounding period such as the principal amount and interest earned after the first unit of time becomes the principal for the second unit, the principal amount and interest earned after the second unit of time becomes the principal for third time and so on. After that certain period, the difference between the amount and the money borrowed is the compound interest.
Total Period
It is a time period to which the principal amount is borrowed or lended or invested at a certain rate of interest. At the end of this period the total amount comprises of principal and interest should be returned.
Compounding Period or Frequency
It is a certain period of time after which an interest earned on principal during that period added to the principal is called as Compounding Period.
Interest Rate
Interest Rate is the rate at which the money is borrowed or saved or lended or invested.
When it comes to online calculation, this compound interest calculator may assist you to determine which interest rate and compounding period provide the best interest by comparing different deals available in the finance market. It is featured calculator which allows user to calculate the CI in any unit of World currencies like USD, GBP, AUD, JPY, INR, NZD, CHF etc. Before you start perform such calculations, select the desired currency unit from the currency selection drop down menu given at just above the compound interest calculator.