Compound Interest Calculator

What is Compound Interest(CI) Calculator?

A Compound Interest Calculator is a tool or utility used to calculate the growth of an investment or savings over time, where the interest earned is reinvested to generate additional earnings. Compound interest is a powerful concept in finance, as it allows for exponential growth of an initial investment.

Principal (Initial Investment):

• The principal is the initial sum of money invested or deposited.
• This amount will grow as interest is applied over time.

Interest Rate:

• The interest rate is the percentage of the principal earned or paid over a specific period.
• It can be an annual, monthly, or other periodic rate, depending on the terms of the investment.

Compounding Frequency:

• Compounding refers to the process of earning interest not only on the initial principal but also on any accumulated interest.
• Common compounding frequencies include annually, semi-annually, quarterly, and monthly.

Time (Duration):

• The duration is the length of time the investment or loan will accumulate interest.
• The longer the time period, the more significant the compound interest growth.

Compound Interest Formula:

• The formula to calculate compound interest is:
  A = P(1 + r/n)^(nt)
• Where:
  A = the future value of the investment/loan, including interest
  P = the principal investment amount
  r = the annual interest rate (decimal)
  n = the number of times interest is compounded per year
  t = the time the money is invested or borrowed for, in years

For example, if you invest ₹1,000 at an annual interest rate of 5%, compounded monthly for 5 years, the compound interest would be calculated as:
A = 1000(1 + 0.05/12)^(12*5) = ₹1,283.36