Compound Interest Problems
This is a list of the example problems which can be solved by using this calculator.
Problems with unknown interest and amount
Example 1: What will a deposit of \$4,500 at 7% compounded yearly interest be worth if left in the bank for 9 years?
Example 2: What will a deposit of $3,500 at 10% compounded monthly be worth if left in the bank for 8 years?
Problems with unknown principal
Example 3: How much money would you need to deposit today at 8% annual interest compounded monthly to have \$1200 in the account after 12 years?
Example 4: Find the present value of \$1,000 to be received at the end of 2 years at a 12% nominal annual interest rate compounded quarterly.
Problems with unknown interest rate
Example 5: What annual interest rate is implied if you lend someone $1,700 and are repaid $1,910 in two years?
Example 6: Suppose that a savings account is compounded monthly with a principal of \$1350. After 8 months, the amount increased to \$1424. What was the per annum interest rate?
Example with unknown time period
Example 7: How long does it take for \$4,300 to grow into \$2,720 at 9% compounded quarterly?
Related: Rich Man, Poor Man - about the power of compounding
When interest is compounded, interest is paid on previously earned interest. If you are an investor, you want to compound interest. If you are a debtor, you want to avoid it, particularly if you ever miss a payment or a payment is not enough to cover the interest due.
You can use this online interest calculator as a:
- loan interest calculator
- savings interest calculator
- daily interest calculator
- negative interest calculator
- investment interest calculator
As a side benefit to this calculator's date accuracy, you can use it for date math calculations. That is, given two dates, it will calculate the number of days between them or it will find the date that is "X" days from the first date.
Calendar Tip: When using the calendar, click on the month at the top to list the months, then, if needed, click on the year at the top to list years. Click to select a year, select a month and select a day. Naturally you can scroll through the months and days too. Or you can click on "Today" to quickly select the current date.
If you prefer not using a calendar, single click on a date or use the [Tab] key (or [Shift][Tab]) to select a date. Then, as mentioned, type 8 digits only - no need to type the date part separators. Also, because the date is selected, you do not need to clear the prior date before typing. If mm/dd/yyyy is selected for the date format, for March 15, 2016, type 03152016.
Related: Loan Carrying Cost: Interest Reduction Techniques
Related: What tools does the Fed have left? Part 1: Negative interest rates. (Link goes to Ben Bernanke's Blog)
The compound interest calculator has been, over the years, one of the more popular financial calculators on this site. We hope you find it useful.
Compound Interest Calculator Help
Enter an amount and a nominal annual interest rate.
Date Math: If you change either date, days between dates will be calculated. If you enter a positive number of days, the end date will be updated. If you enter a negative number of days the start date will be updated.
The above means you can calculate interest for a specific number of days and not worry about what the dates are. If you need to know the interest for 31 days, then enter 31 for the number of days and don't worry about the dates.
Set the compounding and days-in-year. Click "Calc". Interest and future value are calculated (FV is starting amount plus the interest.) Annual percentage yield is used for comparing investments. It is the rate institutions must quote in the US for interest bearing accounts. The holder of such an account can use the APY to compare different accounts.
Interest may be calculated based on a unit of time, say a month. This is known as "Periodic Interest" In that case, a month's interest is always the same for the same interest rate and same principal balance regardless of the length of the month. Given $10,000 principal and an interest rate of 6.75% the interest will be the same for February as it is for March. Note if you select a periodic method such as "weekly", "biweekly" etc., and if the dates enter do not equate to a number of full periods, then interest will be calculated for the fractional period by counting the days and calculating simple interest. This generally results in 1/2 a month's interest being less than 1/2 of a full month's interest when using monthly compounding.
There is also "exact day interest". Interest is calculated based on the number of days. In this case, the amount of interest will be different for February and March. Set compounding to "continuous", "daily" or "simple" for daily interest calculations.