How to use
Compound Interest Calculator is a tool for calculating the compounding interest return on stock or cryptocurrency investments.
- Initial Investment : Enter initial investment.
- Number of Times : Enter the investing period. The calculation of the compound of interest is repeated as many times as the entered amount.
- Interest Rate : Enter the expected compound interest rate.
- Calculate : Output the compounded results.
What is compound interest?
Compound interest is a method used to calculate interest on an investment. It involves adding together the principal amount and the previously generated interest to determine the next interest payment. Unlike simple investments that earn a fixed amount of interest each time, compounding investments accumulate more and more interest, resulting in exponential growth of your assets over time.
For example, let's assume an initial capital of 10000 with a yearly increase of 10%. In the first year, the interest increases by 10%, resulting in a total amount of $11,000. In the second year, the interest is calculated based on the new total amount, which leads to an 11% increase, resulting in a total of 12210. Finally, in the third year, the total amount becomes 13310, which is a 33.1% increase in the principal. This increase is 3.1 percentage points higher than if you had assumed a single interest rate.
Compound interest formula
When investing with compound interest, the future value of the assets can be calculated in the following ways.
- F : Future value
- P : Present value
- r : Interest rate
- n : Number of compounding periods
The formula for compound interest used in this calculator follows this formula.
Rule of 72
The Rule of 72 is a mental calculation to determine how long it takes for an asset to double with compounding interest.
The calculation is simple: divide 72 by the compound interest rate. For instance, if the interest rate is 5%, it would take approximately 72/5 = 14.4 years for the asset to double. This estimation is very close to the actual period of 14.207 years. The Rule of 72 is helpful in situations where a calculator is not available. Occasionally, the Rule of 69 or the Rule of 70 is used because using 69.3 or 70 is mathematically more accurate than 72. However, the Rule of 72 is more commonly employed as it is more divisible by natural numbers.
Where to Use
Most investments can yield profits through compound interest. When investing in deposits, stocks or cryptocurrency, first calculate potential returns using the Compound Interest Calculator and design your future plans.