Compound Interest Calculator

Instructions

1. Compound Future Value Principle: The sum of principal and interest at the end of each period becomes the principal for the next period, so the principal amount changes each period.

2. Compound Interest Formula:

   $FV = PV \times (1+\frac{r}{n})^{n \times t}$

   • FV: Future Value
   • PV: Present Value (Principal)
   • r: Annual Interest Rate (decimal)
   • n: Number of compounding periods per unit time t
   • t: Number of time units

3. Rule of 72: Estimates how many years it takes to double your money at a fixed annual interest rate. Best for rates between 6% and 10%, but works for rates below 20% as a rough guide.

   • Formula: $n = \frac{72}{r}$ (years)
   • Example: 8% annual rate, doubling time $n=\frac{72}{8}=9$ years
   • The Rule of 72 reflects the effect of compounding.

4. Fixed vs. Floating Rates:

   • Fixed Rate: The interest rate does not change during the loan period; set at contract signing.
   • Floating Rate: The interest rate can be adjusted periodically during the loan, usually annually based on market rates.

This tool provides accurate compound interest calculations, suitable for investment, finance, and accounting. Simple and easy to use.