find the amount and compound interest on 40000 at 5% for 4 years
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Compound Interest Calculator
Use a calculator to know how much compound interest you will earn out of your investment, like a Fixed Deposit (FD) for example, if you are planning to apply for a term deposit. A compound interest calculator is a tool through which compound interest can be calculated online. Compound interest calculation can be done for different tenures and interest payout frequencies such as daily, monthly, quarterly, half-yearly or yearly. Understand the power of compound interest and see how it will help grow your investment by using an online compound interest calculator. In this write up we explore more about what is compound interest, how it benefits an investor, how you can use a compound interest calculator and much more. Read on further for more details.
What is Compound Interest?
Compound interest, also known as compounding interest, is accumulated interest that is added to the principal amount invested to calculate the interest on a deposit. In simple words, compound interest is the ‘interest earned on interest’. This simply means that compound interest is earned on the principal plus the interest earned. The principal basically increases every year or depending on how frequently compound interest is calculated .
Let us look at an example to better understand the concept of compound better:
Suppose you make an investment of Rs.50,000 in a fixed deposit for 5 years at 10%, the interest earned for the first year will be Rs.5000.
However, for the second year, the principal will not be Rs.50,000, but the accumulated interest amount, plus the principal. This means that the principal will be Rs.50,000 + Rs.5000 = 55,000.
Second year principal = Previous year’s principal + Interest earned, which is Rs.50,000 + Rs.5,000 = Rs.55,000. It is clearly seen here that the interest is added back to the principal amount to calculate interest for the following years. This is nothing but compounding.
The below table illustrates how interest is earned when the interest is compounded.
Principal Year Interest earned
Rs.50,000 1 Rs.5000
(Rs.50,000 + Rs.5000) Rs.55,000 2 Rs.5,550
(Rs.55,000 + Rs.6055) Rs.60,550 3 Rs.6055
(Rs.60,550 +Rs.6055) Rs.66,605 4 Rs.6,660.5
(Rs.66,605 + Rs.6,660.5) Rs.73,265.5 5 Rs.7,326.55
Compound interest calculation: Daily, monthly, quarterly, half-yearly, yearly
A compound interest calculator allows an investor to know how much interest he/she will earn for different interest computation frequencies. This may be on a daily, monthly, quarterly, half-yearly, or yearly basis. The interest compounding frequency makes a difference in the total interest that is earned on any type of deposit. To understand this better, let us take a look at an example:
For example, if you invest Rs.10,000 on an FD in ICICI Bank for a period of 1 year at the rate of 6.60%, the total interest earned in case of monthly compounding will be Rs.656.
On the other hand, if the interest is compounded on a quarterly basis, for the same principal amount for the same tenure and interest rate, the total interest earned will be Rs.660.
Again, if the interest is compounded on a yearly basis, keeping all the other parameters same, the aggregate interest earned will be Rs.677.
Refer to the below table to understand how different interest compounding frequencies affect interest rate:
Compounding frequency Principal amount Interest earned
Monthly Rs.10,000 Rs.656
Quarterly Rs.10,000 Rs.660
Yearly Rs.10,000 Rs.677
Compounding Frequencies
Daily
Monthly
Quarterly
Half-yearly
Yearly
How to Calculate Compound Interest?
Compound interest can be calculated using various online tools like a compound interest calculator for example. To do this calculation you need the following information:
Principal amount
Tenure of investment
Interest rate
You can use the BankBazaar compound interest calculator to know the total interest that will earned on a particular investment. All you need to do is to choose the investment amount, the interest rate and the time period for which you are putting in your money.
Compound Interest Formula
The compound interest formula is: A = P (1 + r/n) ^ nt
V = Future value of investment
P = Principal
r = Interest rate
n= Interest compounding frequency
t = Tenure of the investment
Step-by-step explanation:
Compound Interest= 8620.25
Amount=48620.25
Hope it helps u