Current Bank Saving Rates Calculator

Compound Interest Formula:

\[ FV = P \times (1 + \frac{r}{n})^{n \times t} \]

Principal Amount (P):

Interest Rate (r):

Compounding Periods (n):

Time (t):

years

Future Value (FV):

Interest Earned:

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1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It's often referred to as "interest on interest" and can cause wealth to grow exponentially over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ FV = P \times (1 + \frac{r}{n})^{n \times t} \]

Where:

\( FV \) — Future value of the investment
\( P \) — Principal investment amount
\( r \) — Annual interest rate (in decimal form)
\( n \) — Number of times interest is compounded per year
\( t \) — Number of years the money is invested

Explanation: The formula calculates how much an investment will grow over time when interest is compounded at regular intervals.

3. Importance of Compound Interest

Details: Compound interest is a powerful concept in finance that allows investments to grow exponentially over time. Understanding compound interest helps in making informed decisions about savings and investments.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, select compounding frequency, and investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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 the principal plus accumulated interest.

Q2: How does compounding frequency affect returns?
A: The more frequently interest is compounded, the higher the effective return will be, as interest is earned on interest more often.

Q3: What is the Rule of 72?
A: The Rule of 72 is a simple way to estimate how long an investment will take to double: Divide 72 by the annual interest rate.

Q4: Are bank savings accounts the best way to grow money?
A: While safe, savings accounts typically offer lower returns than other investments like stocks or bonds, which carry higher risk.

Q5: How does inflation affect savings?
A: If the interest rate is lower than inflation, the purchasing power of your savings decreases over time despite earning interest.