Compound Interest Calculator

Compound Interest Calculator helps to compute the interest when compounded over a certain period of time. Four parameters are required to determine the compound interest. These are the principal amount, rate of interest, compound interval, and time period. In mathematics, compound interest is calculated on the amount obtained by adding the interest to the principal amount of the current period.

What is a Compound Interest Calculator?

Compound Interest Calculator is an online tool used to calculate the interest added to the principal sum given a certain time period, compound interval, and rate of interest. When you decide to open a bank account, the amount of money deposited is compounded over time to make your balance grow. Compound interest is widely utilized in the field of finance and economics. To use this compound interest calculator, enter the values in the input boxes given below.

Compound Interest Calculator

*Use only 5 digits for the principal, 2 digits for the rate of interest, and 2 digits for time.

How to Use the Compound Interest Calculator?

Please follow the steps below to find the compound interest using an online compound interest calculator:

• Step 1: Go to Cuemath’s online compound interest calculator.
• Step 2: Enter the numbers/values in the input box of the compound interest calculator.
• Step 3: Click on the "Calculate" button to find the compound interest.
• Step 4: Click on the "Reset" button to clear the fields and enter new values.

How Does Compound Interest Calculator Work?

Simple interest is calculated only based on the principal amount. However, compound interest is calculated on both the principal amount and the accumulated interest over every time period. There are a few key factors that need to be understood before calculating the compound interest. These play a drastic role in impacting the final returns. Given below are the terms associated with compound interest.

• Principal amount - This is the original amount of money that is deposited. The compound interest is calculated on the basis of this principal amount. It is often denoted by P.
• Rate of interest - This is the amount of interest that is due after a certain time period. Its value depends on the principal amount. r is used to represent the rate of interest and is given in percentage.
• Compound interval - The number of times per year that the accumulated interest is paid out is known as the compound interval. It is represented by n.
• Time period - The complete amount of time for which the principal sum is deposited is known as the time period. Usually, it is given in years and denoted by t.

Compound Interest = \(\left [ P\left (1 + r/n \right )^{nt} \right ] - P\)

Solved Example on Compound Interest

Example 1: Find the compound interest for a principal of $30,000 for a rate of interest of 12%, for a time of 1 year, if the interest is compounded every six months and verify it using the compound interest calculator.

Solution:

The given information can be taken as the Principal (P) = $30,000, Rate of interest= 12% per annum, time period = 1 year, n = 2.

r = 12% = 12/100 = 0.12

We shall apply this value in the compound interest formula.

Compound Interest = \(\left [ P\left (1 + r/n \right )^{nt} \right ] - P\)

=\(\left [ 30000\left (1 + 0.12/2 \right )^{2*1} \right ] - 30000\)

=\(\left [ 30000\left (1 + 0.6 \right )^{2} \right ] - 30000\)

⇒ 33708 - 30000 = 3708

Therefore the compound interest is $3708.

Example 2: Find the compound interest for a principal of $25,000 for a rate of interest of 8%, for a time of 1 year, if the interest is compounded quarterly and verify it using the compound interest calculator.

The given information can be taken as the Principal (P) = $25,000, Rate of interest= 8% per annum, time period = 1 year, n = 4.

r = 8% = 8/100 = 0.08

Applying the Compound interest formula we get

Compound Interest = \(\left [ P\left (1 + r/n \right )^{nt} \right ] - P\)

=\(\left [ 25000\left (1 + 0.08/4 \right )^{4*1} \right ] - 25000\)

=\(\left [ 30000\left (1 + 0.02 \right )^{4} \right ] - 25000\)

=27060.8 - 25000

=$2060.8

Similarly, you can try the compound interest calculator to evaluate the compound interest for the following:

• Principal of $5000 for a time of 2 years and rate of interest of 10% and compounded quarterly.
• Principal of $5000 for a time of 5 years and rate of interest of 10% and compound half-yearly.

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