This Compound Interest Calculator can help you calculate the compound interest accumulation and ultimate balances for both fixed principal amounts and additional periodic instalments. Optional elements for consideration are the tax on interest income and inflation..
Interest is the compensation provided by the borrower to the lender for the usage of money, expressed as a percentage or sum. The notion of interest serves as the foundation for the majority of global financial products.
There are two techniques of accumulating interest: simple interest and compound interest.
The following is a basic explanation of how interest works. Derek would like to borrow $100 (also known as the principal) from the bank for a year. The bank wants 10% interest on it. How to compute interest:
$100 × 10% = $10
This interest is added to the principal, and the total represents Derek's due repayment to the bank one year later.
$100 + $10 = $110
This interest is added to the principal, and the total represents Derek's due repayment to the bank one year later.
$100 + $10(year 1) + $10(year 2) = $120
Two years later, Derek owes the bank $120: $100 for the principal and $20 for interest.