You can also use a compound interest calculator to calculate returns on investments that offer compounding returns, like mutual funds. When the amount invested is large and the time period is longer, the calculation for interest can become a little complicated, and that is where a compound interest calculator is useful.Ī compound interest calculator makes it easier to calculate compound interest so that you don’t need to make any manual calculations. And so on, for every consecutive year till you remain invested. Hence, you shall earn interest on both ₹100 (principal) and ₹5 (the interest earned), taking the value of your investment to ₹110.25. However, when the interest is calculated the next year, it will be calculated on ₹105 and not ₹100. At the end of 1 year, the amount due to you will be ₹105. For example, say you invested ₹100 in a bond or fixed deposit that pays 5% interest per annum. You earn compound interest when you earn interest on not only the original principal amount invested as well as the interest that accumulates on such principal. Compound interest is simply the interest earned on interest.
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