Compounding is when you get interest on your investments that are reinvested to generate additional capital in the form of profit. The power of the compounding calculator is used to know the future value of an investment.
A compounding calculator can be used to know your future investment value or worth of the investment. It is used to calculate your investment after “n” numbers of years at a specific interest rate. The entire concept behind compounding is adding interest on the principle amount and getting that final amount after a specific year at a compound interest rate.
What is a compound interest calculator?
A compound interest calculator is an online tool that helps an investor to cut down the manual process of calculation and make it easy for them to calculate within a few seconds of span. No one can predict the exact value of return on investment but this at least gives you a nearby value on return. Since calculating interest rates can be a complex process, this helps you to calculate that value easily.
How to use the power of the compounding calculator?
The power of the compounding calculator is easy to use. You just have to include the principal amount, investment period, and rate of return yields. This field is required to check the total investment they are going to get after a specific period of time. The Power of compounding calculator gives you an overview of the total investment earned, and wealth gained from the investment.
As we can say compounding calculator shows the total investment and total return you have earned during a specific period of time with a specific interest rate and rate of return.
Let’s understand this more clearly with the example,
Suppose you have invested INR 1,00,000 for 5 years with an expected rate of return of 15%. Then we can enter like this: –
- Principle amount: – Enter principal amount INR 1,00,000
- Investment period: – Enter 10 years of investment period
- Rate of return: – Then enter the rate of return of 15%
Then the calculated values shows like this: –
- Total investment = INR 1,00,000
- Wealth gained = INR 2,10,585
- Maturity value = INR 3,10585
Benefits of using an online compound interest calculator
- It’s reliable: – Calculator helps to show how much a person needs investment to get desired returns to meet future goals.
- They are Customizable: – You can customize the principle amount, interest rate, and numbers of the year you want to invest according to your needs and wants.
- Easily calculate total returns: – It gives you a clear picture of your future returns and shows how much you have to keep investing every time to reach those returns.
- Helps you to plan your finance better: – Financial planning is key to a better future. While diversify helps you to lower the risk and gives you the maximum benefits out of compounding interest rates. An online compound calculator helps you to understand investment planning and how much you need to invest regularly to get that desired return.
How to calculate compound interest?
The formula which is used to calculate compound interest is A = p (1+r/n)nt
A = future value of investment
P = principle investment value
r = interest rate
n = number of times interest applied per time period
t = the no. of times money is invested