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Formula used for computing compound interest
The formula used in the compound interest calculator is A = P(1+r/n)(nt)
- A = the future value of the investment
- P = the principal investment amount
- r = the interest rate (in percentage)
- n = the number of times that interest is compounded per period
- t = the number of periods the money is invested for
Simple Interest vs Compound Interest
There is a fundamental difference between simple interest calculation and compound interest computation. While the simple interest is based on the principal amount of a loan or deposit. In contrast, compound interest is based on the principal amount and the interest that accumulates on it in every period. Simple interest is calculated only on the principal amount of a loan or deposit, so it is easier to determine than compound interest.
Simple Interest=P×r×n where:
P=Principal amount
r=Annual interest rate
n=Term of loan, in years
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