Ending Value of Investment Calculator

Compound Interest Formula:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Principal Amount (P):

Annual Interest Rate (r):

Time (t):

years

Compounding Periods (n):

Ending Value (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is the addition of interest to the principal sum of a loan or deposit, where the interest that has been added also earns interest. This differs from simple interest, where interest is not compounded.

2. How the Calculator Works

The calculator uses the compound interest formula:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Where:

\( A \) — Final amount
\( P \) — Principal investment amount
\( r \) — Annual interest rate (decimal)
\( n \) — Number of times interest is compounded per year
\( t \) — Time the money is invested for (years)

Explanation: The formula calculates how much an investment grows when interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of Compound Interest

Details: Understanding compound interest is crucial for financial planning. It demonstrates how investments grow over time and why starting early can significantly increase your returns.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as a percentage), investment period in years, and how often interest is compounded. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding leads to higher returns. Daily compounding yields more than annual compounding at the same rate.

Q3: What is the Rule of 72?
A: It's a quick way to estimate how long it takes for an investment to double: divide 72 by the interest rate (as a whole number).

Q4: Can this calculator be used for loans?
A: Yes, the same formula applies to loans with compound interest, though the result would represent the total amount owed.

Q5: What's the best way to maximize compound interest?
A: Start early, invest regularly, choose higher compounding frequencies, and reinvest all earnings.