COMPOUND INTEREST CALCULATOR
A compound interest calculator is a financial tool used to calculate the growth of an investment or savings account over time, taking into account the effect of compounding. Compound interest refers to the interest earned on both the initial principal amount and the accumulated interest from previous periods.
Here's how a compound interest calculator typically works:
- Initial Investment: Users input the initial amount of money invested or saved, known as the principal.- Interest Rate: Users input the annual interest rate, expressed as a percentage, that the investment will earn.- Time Period: Users input the duration of the investment in years or the number of compounding periods.- Additional Contributions: Some calculators allow users to input additional contributions made to the investment or savings account over time.- Calculation: The calculator then computes the future value of the investment or savings account, taking into account the effect of compounding interest.- Result: The calculator provides users with the future value of the investment or savings account, including both the principal amount and the accumulated interest.
Compound interest calculators are valuable tools for investors and savers to understand how their money can grow over time through the power of compounding. By using these calculators, individuals can make informed decisions about investment strategies, savings goals, and retirement planning.