Marcus Financial 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 Frequency (n):

Final Amount (A):

Interest Earned:

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1. What is the Compound Interest Formula?

The compound interest formula calculates the amount of money accumulated over time when interest is earned on both the initial principal and the accumulated interest. It's particularly relevant for savings accounts like Marcus's high-yield savings products.

2. How Does the Calculator Work?

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 amount ($)
$ r $ — Annual interest rate (decimal)
$ n $ — Number of compounding periods per year
$ t $ — Time the money is invested (years)

Explanation: The formula accounts for how frequently interest is compounded (daily, monthly, quarterly, etc.), which significantly affects the final amount.

3. Importance of Compound Interest

Details: Compound interest is a powerful concept in personal finance. For Marcus savings accounts with competitive APYs (like 4.40%), understanding compound growth helps with financial planning and goal setting.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 4.40 for 4.40% APY), time in years, and select the compounding frequency that matches your account terms.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APY and APR?
A: APY (Annual Percentage Yield) includes compound interest effects, while APR (Annual Percentage Rate) doesn't. Marcus typically advertises APY for savings products.

Q2: How often does Marcus compound interest?
A: Marcus high-yield savings accounts compound interest daily and credit it monthly.

Q3: Does this calculator account for additional deposits?
A: No, this calculates compound growth for a single initial deposit. For recurring deposits, you'd need a different formula.

Q4: How accurate is this for Marcus savings accounts?
A: Very accurate for fixed-rate products. For variable-rate accounts, results may vary if rates change.

Q5: Why does compounding frequency matter?
A: More frequent compounding (daily vs. annually) yields higher returns because interest earns interest more often.