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Compound Interest Calculator

Compound Interest Calculator is an online tool to calculate the future value of the deposit when the principal amount, rate of interest per year, number of times compounded anually and time period in years has benn given.

What is Compound Interest?

If you walk into a bank and open up a savings account you will earn interest on the money you deposit in the bank. If the interest is calculated once a year then the interest is called “simple interest”. If the interest is calculated more than once per year, then it is called “compound interest”.

Simple and Compound Interest Curve

Compound Interest Formula

The mathematical formula for calculating compound interest depends on several factors. These factors include the amount of money deposited called the principal, the annual interest rate (in decimal form), the number of times the money is compounded per year, and the number of years the money is left in the bank. These factors lead to the formula

Compound Interest Formula

FV = Future value of the deposit

P = Principal or amount of money deposited

r = Annual interest rate (in decimal form)

n = Number of times compounded per year

t = Time in years

Solving Compound Interest Problems

To solve compound interest problems, we need to take the given information at plug the information into the compound interest formula and solve for the missing variable. The method used to solve the problem will depend on what we are trying to find. If we are solving for the time, t, then we will need to use logarithms because the compound interest formula is an exponential equation and solving exponential equations with different bases requires the use of logarithms.