1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of savings with monthly compounding. It shows how your money grows over time when interest is earned on both the principal amount and accumulated interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Future value (₹ or currency)
• \( P \) — Principal amount (₹ or currency)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time in years

Explanation: The formula accounts for monthly compounding by dividing the annual rate by 12 and raising to the power of 12 times the number of years.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest helps in financial planning, investment decisions, and achieving long-term savings goals. It demonstrates the power of time and consistent saving.

4. Using the Calculator

Tips: Enter principal amount in ₹, annual interest rate as a percentage (e.g., 5 for 5%), and time 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 savings accounts and investments.

Q3: Can I use this for different currencies?
A: Yes, the formula works for any currency. Just input the principal amount in your desired currency.

Q4: What if I make regular contributions?
A: This calculator assumes a single principal amount. For regular contributions, a different formula would be needed.

Q5: How accurate is this calculation?
A: The calculation is mathematically precise for the given inputs, assuming constant interest rate and no additional deposits or withdrawals.