i 7. Find the rate of interest for which 750000 amounts to 10,53,696 after 3 years if the interest is compounded annually.
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Answer:
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Step-by-step explanation:
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.
PrincipalYearInterest earnedRs.50,0001Rs.5000(Rs.50,000 + Rs.5000) Rs.55,0002Rs.5,550(Rs.55,000 + Rs.6055) Rs.60,5503Rs.6055(Rs.60,550 +Rs.6055) Rs.66,6054Rs.6,660.5(Rs.66,605 + Rs.6,660.5) Rs.73,265.55Rs.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 frequencyPrincipal amountInterest earnedMonthlyRs.10,000Rs.656QuarterlyRs.10,000Rs.660YearlyRs.10,000Rs.677