Compounding Returns Calculator

About Compounding Returns Calculator

What is compounding?

In simple terms, compounding refers to an increase in the value of an asset with the interest earned both on the principal as well as accumulated interest. Compounding is a process that increases an asset’s earnings from either capital gains or interest reinvested to generate additional earnings over the time. In other words, compounding is the process by which interest is earned on interest.

What is compound interest?

An interest that is added to the principal amount of a loan or deposit is known as compound interest. It is called compounding interest because interest earned is accumulated on the principal amount and the interest for the upcoming term is calculated on the basis of the new amount accumulated i.e. the principal amount and accumulated interest over the period of years. The process of compounding interest is repeated throughout the investor’s investment tenure.

The power of compounding increases the investors’ investment each year, giving him a definite edge over accumulating funds by the way of simple interest.

How is compound interest calculated?

Compound interest is calculated through the below formula :
A = P (1 + r/n) ^ nt

Here P denotes the principal interest, r is the rate of interest and n represents the number of times the interest is compounded in a year and t presents the number of years.

Consider the below example to understand the compound interest calculation in a better way.

Arjun makes an investment of `50,000 for a period of 5 years with an annual interest rate of 10%. With the compound interest calculated on it, the interest earned in the initial year will be calculated on the following basis:
50,000 x 10/100 = `5,000.

The interest for Arjun’s second year will be calculated on the basis of `55,000 i.e. the interest earned and the principal amount.

The interest earned in the second year will be `5,500.

Thus, over the period of 5 years, Arjun will earn a substantial interest of `30,525 with the power of compounding.

How to use the InvestOnline Compounding Returns Calculator?

The compound interest calculator has the features that allow you to vary both the deposit intervals and the compounding intervals from daily to annual and everything in between. Calculate and compare the expected earnings on various investment scenarios so that you know if X% return, compounded daily is better than a Y% return, compounded annually.

The InvestOnline compound interest calculator helps you calculate the interest earned and the overall amount accumulated over the period of years.

To use the InvestOnline compound interest calculator, all you need to do is:

• Enter the amount you can invest today
• Enter the details of the SIP or the monthly investment you can make
• Investment period
• Expected return

If the amount you can invest today is ` 9 lakhs

For a period of 10 years at an expected return rate of 10%, then your interest earned would be `14,34,368 and the overall investment would be `23,34,368.

And if you contribute `1,000 on a monthly basis, then the overall interest earned and the amount accumulated would be `84,798 and `2,04,798 respectively.

Benefits of using the InvestOnline compounding returns calculator:

• The InvestOnline compound interest calculator helps you with an estimate of how much your investment will yield over the period of time
• You can customize the InvestOnline calculator as per your requirement to choose a different rate of interest and
• It saves your time and offers you with quick results that help you make an informed investment
• InvestOnline compound interest calculator is user-friendly and gives you accurate results
• Helps investors decide how much they should invest to get the return they are expecting
• The calculator is customized to cater to all types of investors

FAQs on compounding returns calculator :

Can I use the compound interest calculator to calculate simple interest?

No, the compound interest calculator cannot be used to calculate simple interest.

Can compound interest double my money?

Yes, compound interest helps you double your money over a substantial period of time for which you can use the InvestOnline compound interest calculator to know the exact investment period.

Can compound interest be earned on fixed deposits?

Yes, compound interest can be earned on fixed deposits.

What is difference between simple interest and compound interest?

Simple interest is a type of interest calculation method where interest is calculated on the same principal amount. Whereas, a compound interest is a type of interest calculation method in which the interest is calculated on the principal amount as well as the interest earned over the period of years.