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Compound Interest Formula:
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Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It allows savings to grow faster over time as interest is earned on both the principal and the accumulated interest.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how much your savings will grow over time with compound interest, taking into account how frequently the interest is compounded.
Details: Understanding compound interest is crucial for financial planning, savings growth estimation, and making informed investment decisions. It demonstrates how money can grow over time through the power of compounding.
Tips: Enter the principal amount in PHP, annual interest rate as a decimal (e.g., 0.05 for 5%), number of compounding periods per year, and time in years. All values must be positive numbers.
Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.
Q2: How often do Philippine banks compound interest?
A: Most Philippine banks compound interest monthly or quarterly, but it varies by bank and account type. Check with your specific bank for their compounding frequency.
Q3: Are there taxes on interest earnings in the Philippines?
A: Yes, interest income from Philippine bank deposits is subject to a 20% final withholding tax, unless exempted.
Q4: What's a typical interest rate for savings accounts in the Philippines?
A: Typical savings account rates range from 0.1% to 1.0% annually, though time deposits and special accounts may offer higher rates.
Q5: How can I maximize my interest earnings?
A: Consider time deposits for higher rates, maintain the required minimum balance to avoid fees, and explore different banks for the best rates.