Famous scientist Albert Einstein once famously said that "Compound interest is the 8th wonder of the world. He who understands it earns it, and he who doesn't pays it."
The concept of compounding is compelling. If we summarize the idea in simple terms, compound interest is interest on interest. Compound interest is when the principal includes the accumulated interest from previous periods, and the following interest is calculated on this. Loans, deposits, and investments are all subject to compounding. The number of times interest is calculated in a year is known as compounding frequency. The most common compounding frequencies are daily, weekly, monthly, quarterly, half-yearly, and annually.
The compound interest calculator shows you how your money can grow by compounding interest. You can also use the compound interest calculator to see how different interest rates and loan lengths affect the amount of compounded interest you'll pay on a loan. The compound interest calculator online works on the compound interest formula. You will have to input the principal amount, the frequency of compounding, your investment tenure, and the expected rate of return. The compound interest calculator displays the results as the maturity amount at the end of investment tenure.
The formula for compound interest, including principal sum, is:
A = P (1 + r/n) (nt)
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per unit t
t = the time the money is invested or borrowed for
Compounded interest only (without principal): P (1 + r/n) (nt) – P
The SIP calculator online gives you estimates using three different growth scenarios like above-average, average, and below-average returns. You can pick a strategy that best fits your needs and begin investing.
The systematic investment plan calculator facilitates obtaining a close estimate of the amount accumulated after completing periodic payments for the desired tenure.
Estimating future value or the maturity amount will let you choose the most suitable
You can earn interest on the money you've saved/invested, and the interest component of your investment earns interest.
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Interest earned on the original principal plus accumulated interest is referred to as compound interest. You're not only earning interest on your initial deposit, but you're also earning interest on your interest. Consider compound interest in the same way that the "snowball effect" occurs. A snowball begins small, but as more snow is added, it grows larger. It gets bigger at a faster rate as it grows.
Disclaimer
ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.
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