Compound Interest Calculator For Monthly Investment

Compound Interest Formula:

\[ A = P \times (1 + r/12)^{12 \times t} + PMT \times \left[ \frac{(1 + r/12)^{12 \times t} - 1}{r/12} \right] \]

Initial Principal (P):

₹

Monthly Investment (PMT):

₹

Annual Interest Rate (r):

Time (t):

years

Future Value (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of an investment that earns interest on both the initial principal and the accumulated interest from previous periods. This formula is essential for understanding long-term investment growth.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + r/12)^{12 \times t} + PMT \times \left[ \frac{(1 + r/12)^{12 \times t} - 1}{r/12} \right] \]

Where:

\( A \) — Future value of investment
\( P \) — Initial principal amount
\( PMT \) — Monthly investment amount
\( r \) — Annual interest rate (in decimal)
\( t \) — Time in years

Explanation: The formula accounts for monthly compounding and regular monthly contributions to calculate the total future value of your investment.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest helps investors make informed decisions about savings and investments, showing how regular contributions and time can significantly grow wealth through the power of compounding.

4. Using the Calculator

Tips: Enter the initial investment amount, monthly contribution, annual interest rate, and investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is 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 is interest compounded in this calculator?
A: This calculator assumes monthly compounding, which is common for many investment and savings accounts.

Q3: Can I use this calculator for different currencies?
A: Yes, the calculator works with any currency as long as you maintain consistent currency units for all inputs.

Q4: What if I don't make monthly contributions?
A: If you don't make monthly contributions, simply enter 0 for the monthly investment amount.

Q5: How accurate is this calculator for real-world investments?
A: This calculator provides a mathematical estimate. Actual investment returns may vary due to market fluctuations, fees, and other factors.