Most online calculators are used to automate relatively simple calculations that could easily be done manually. For example, calculating tax on income or sales actually involves two actions: determining the tax base and separating from it the amount of the tax itself at the existing tax rate.
The compound interest calculator features automatic calculation of the income that investments bring over a certain period of time. For clarity, let’s consider the option of a bank deposit on simple and compound interest terms.
Financial calculator: brief description
The online investment calculator is designed to calculate the possible profit at a certain % indicator. Using a financial tool such as a calculator is quite simple; you just need to enter ∑ of the initial deposit, as well as indicate the average% that the investor plans to receive, as well as the deposit period. If you wish, you can choose the most suitable option for replenishing your account.
The resulting profitability will be displayed by month, taking into account universal reinvestment. It is recommended for novice investors to enter parameters that were collected over the past monthly periods. This approach allows you to clearly see the amount of benefit for the investor over the past period.
A specialized calculator of compound interest with reinvestment can be safely used to calculate the potential of investment programs with remote control on stock exchanges. Profitability, according to statistics, varies from 3 to 5% per month. Of course, traditional financial institutions cannot compare with the final profit of a management company, including on the large international Forex market.
Investment activities are profitable, since you can receive a monthly profit regardless of whether the investor goes to work or not. You can always create your own cash flow, which is especially important in the modern world. An investor can become a partner of a large FSM team.
Using a multifunctional calculator with investment functions and reinvestment, you can find out the following data:
- Use the calculator to determine the potential of investment financial deposits, taking into account replenishments and capitalization.
- Find out the reliable percentage of the deposit in its basic form, without additional steps. It is worth noting that in this case capitalization will be required.
- Such an investment financial instrument can be used as a calculator for a long period of time with capital reinvestment.
- Calculate the profitability of financial deposits, taking into account additional top-ups and compound interest.
Compound Interest Calculator
As you can see, independent calculations, even using a formula, are not so simple. And the difference turns out to be significant. Moreover, for investments, compound interest turns out to be more profitable than simple interest, and for loans, vice versa.
But, of course, you don’t need to delve into all these numbers and calculate anything yourself - you can simply use our calculator, which will make all the calculations online in just a couple of seconds.
And if you are interested in favorable loan offers, use our online comparison. This way you can choose the best option in 1 minute and immediately submit an application.
Determining the feasibility of cash deposits using a calculator
Investment is the total ∑ of all costs of investing capital of borrowed or personal origin. In the economics industry, this term is used to refer to an individual or firm that invests in certain assets. This investment approach allows you to increase your own profit in the form of dividends,%.
Experts refer to financial injections as planned expenses for the purchase of assets or other property against future profits. We should not forget about those things that have a nominal value and can be used in various types of activities: securities, property rights, as well as resources received from rent.
Experts say that the development of an investment business plan consists of several main stages:
- Initially, experts develop a business project, which must include information about all expected costs and the final result.
- At stage 2, data is collected in order to study it in detail and calculate it on a calculator. Only this approach allows us to consider each financial investment option in detail, assessing the investment attractiveness of the idea.
- Finally, specialists select the most profitable project.
Every investor should be able to use a special calculator to calculate the profitability of investing their funds, so as not to ultimately suffer financial ruin. The final success largely depends on whether the investor can independently model the volume of economic costs and the result of the manipulations performed.
To take into account all the nuances, experts recommend drawing up a capital investment estimate, which will include all the costs for investment purposes. The calculator’s calculations necessarily include a general period with small divisions (three months each). If the wrong project was chosen, the investor may suffer from serious financial losses.
Investment efficiency assessment
The final effectiveness of the investment policy is displayed by the calculator as a profit figure from cash injections into a particular object. Income is a direct indicator of how quickly the rate of financial turnover increases, compensated by the purchasing power of funds for a certain time period. At the final stage, the investor receives a good profit, which fully covers the risks.
An investment compound interest calculator is necessary when you need to calculate the return time of financial investments on a long-term basis. Professionals always use payback and amortization indicators as the main investment indicator. Thanks to this, it is possible to achieve a reduction in the level of operating costs that were used to implement the project. If we are talking about new production, then the calculator must calculate the number of years required to return investment injections due to increased profits.
Experts often use a calculator to determine the capital overlap amount to know exactly how much money will be needed to pay all taxes and activate depreciation. This approach allows you to calculate exactly when investment actions will begin to generate stable income. Most often, organizations independently determine the payback period for financial investments, and if the final indicator coincides with expectations, then the business idea is supported. If there are a number of current versions of the refund limit, then priority will be given to the plan that has the shortest term.
Example of calculating compound interest for a loan
Let's say you took out a consumer loan for 1000 rubles at 10% per annum for 5 years. Moreover, recalculation occurs every six months.
Thus we have:
- P = 1000
- r = 0.1
- n=2
- t=5
Total, over 5 years you will pay 1000 * (1 + 0.1/2) (2*5) = 1628
The overpayment will be 1000 * (1 + 0.1/2) (2*5) – 1000 = 628
For comparison, if we were talking about simple interest, you would pay 1,500 rubles over 10 years and the overpayment would be only 500.
Features of capital reinvestment
Income in the long term. The whole point is to have universal reinvestment at work. With ordinary financial deposits, the final % is always calculated by the calculator on the entire ∑ of the initial capital investment. But when reinvesting, complex percentages come into play.
This approach is most relevant if the investor does not withdraw his money for the allotted reporting period, but each time adds it to the base amount of the investment. The versatility of this financial approach lies in the fact that the final income increases exponentially. Reinvested % works for additional profit. It is this investment option that is in greatest demand.
In a traditional investment calculator with reinvestment, the following relationship is used - KS = NS * (1+%) n, where:
- Kc is the final ∑ of the contribution.
- % - interest rate in a certain reporting period / 100.
- NS is the initial investment amount.
- n - periods.
The result of the calculation on the calculator is raised to a certain power, which is most suitable only for short investment periods.
As an example, consider the following case: you can invest 1000 US dollars in a bank at 12% per year. With % capitalization, after 50 years you can get 391 thousand dollars. This investment step can act as a good base capital for children and grandchildren. And if you use a calculator to calculate the investment of money for 20 years, then the accrued interest can be used as a good addition to your pension. In our country, this practice is not yet highly developed, since there are no reliable banks that could guarantee the stability of their work after several decades.
Example of compound interest for a deposit
Similarly, let’s say you invested 1000 rubles at 5% per annum for 2 years. And, let’s say, recalculation occurs every month.
Then:
- P = 1000
- r = 0.05
- n = 12
- t = 2
Total, after 2 years you will have 1000*(1 + 0.05/12)(12*2) = 1105 in your account
The profit will be 1000*(1 + 0.05/12)(12*2) – 1000 = 105 rubles
And if we were talking about simple interest, you would only receive 50 rubles in profit.
For comparison, look at the graph, which clearly shows the difference.
Financial calculator: profit index
IP is a relatively calculated monetary return on an investment project (per unit of investment). The business plan under consideration can suit the investor only if this indicator is greater than 1. It is worth noting that in the process of investment calculation, the rate must be used on the calculator.
Experts actively apply internal norms of profitability of an investment project if the investor knows the percentage of the initial cash investment for calculation on a calculator. The optimal result is achieved if the initial investment and the discounted value are on the same plane. The minimum indicator of 100% investment profit from a business project is denoted by the abbreviation VRNP.
The totality of the use of dynamic methods makes it possible to understand whether a financial project is attractive for large investment flows or not. But there are also negative aspects: even for a qualified worker it is difficult to calculate the final data on a calculator, it is necessary to achieve accurate forecasting, and subjectivity in choosing the rate of profit is also possible.
Financial calculator: options for increasing profitability
Compound interest is most beneficial for a long-term investment plan (minimum 4 years). If we consider a shorter period, then the final profit from the Central Bank or bank deposits is practically indistinguishable from the simplest % scheme. But virtually no one would want to wait 50 years to benefit from significant capital gains.
Experts have developed several alternative options that can help increase profits from reinvestment:
- Operate only with large ∑ initial cash deposits, then replenish not only % with deductions, but also with additional funds.
- You can choose an effective investment business project with higher rates. The higher the profit, the higher the risk of losing all your money.
- Use universal financial instruments that involve quick summation of complex percentages. If in a financial organization capitalization is carried out once in a certain reporting period, then frequent refinancing can be carried out in each time period. The final parameters for the calculator are selected individually, since everything depends on the broker.
In order to avoid the most common mistakes, you need to carefully calculate the expected profitability, taking into account complex and simple percentages, even at the stage of choosing an investment business project. Only in this case can the benefits be correctly assessed in clear numbers.
Compound Interest Formula
Compound interest is calculated using the formula A = P (1 + r/n) (nt), where:
- A – the total amount that you will receive in the account (if we are talking about a deposit) or which you will need to repay (if we are talking about a loan)
- P – initial deposit or loan amount
- r – annual interest rate
- n – how many times a year the interest rate is taken into account (some institutions take it into account monthly, some - quarterly, some - annually, this is necessarily written in the contract and in the tariff plan)
- t – number of years for which the deposit or loan was issued
If you want to calculate only the profit/overpayment on a deposit/loan, use this formula: P (1 +r/n) (nt) – P.
