![]() All you need to know is that the column compound amount factor shows the value of the factor ( 1 + r ) t (1 + r)^t ( 1 + r ) t for the respective interest rate (first row) and t (first column). Using the data provided in the compound interest table, you can calculate the final balance of your investment. Let's try to plug these numbers into the basic compound interest formula: This time, we need to compute the interest rate r r r. The time horizon of the investment is 6 6 6 years, and the frequency of the computing is 1 1 1. Assuming that the painting is viewed as an investment, what annual rate did you earn?įirstly, let's determine the given values. Six years later, you sold this painting for $3,000. You bought an original painting for $2,000. This type of calculation may be applied in a situation where you want to determine the rate earned when buying and selling an asset (e.g., property) that you are using as an investment. In this example, we will consider a situation in which we know the initial balance, final balance, number of years, and compounding frequency, but we are asked to calculate the interest rate. This time, some basic algebra transformations will be required. Now, let's try a different type of question that can be answered using the compound interest formula. In case you set the additional deposit field, we gave you the results for the compounded initial balance and compounded additional balance.īesides, we also show you their contribution to the total interest amount, namely, interest on the initial balance and interest on the additional deposit. The total interest, which is the total compounded interest payment.The final balance, that is the total amount of money you will receive after the specified period, and.That's it! In a flash, our compound interest calculator makes all necessary computations for you and gives you the results. ![]() This option can be particularly useful in the long term when your income possibly increases due, for example, to inflation and/or promotions.
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