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 allows investments to grow exponentially over time, making it a powerful tool for wealth creation.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Maturity amount (INR)
• \( P \) — Principal amount (INR)
• \( R \) — Annual interest rate (decimal)
• \( n \) — Compounding frequency per year
• \( T \) — Time period in years

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

3. Importance of Compound Interest

Details: Compound interest is fundamental to long-term investing and wealth building. It demonstrates how small, regular investments can grow significantly over time due to the compounding effect.

4. Using the Calculator

Tips: Enter principal amount in INR, annual interest rate as percentage, select compounding frequency, and time 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 both principal and accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (monthly vs annually) results in higher returns due to interest being calculated more often.

Q3: Is this calculator specific to ET Money investments?
A: This uses the standard compound interest formula that applies to most investment products including those offered by ET Money.

Q4: Can I use this for SIP calculations?
A: This calculator is for lump-sum investments. For SIP calculations, a different formula accounting for regular contributions is needed.

Q5: Are taxes considered in this calculation?
A: No, this calculates gross returns before taxes. Actual returns may vary based on tax implications.