Interest Calculator
Calculate the future value and interest earned for both simple and compound interest scenarios.
Understanding Simple vs. Compound Interest
Interest calculations are fundamental to personal finance. This calculator handles two primary types:
- **Simple Interest:** Interest is calculated only on the initial principal amount. It is commonly used for short-term loans or basic bonds.
- **Compound Interest:** Interest is calculated on the initial principal and also on all the accumulated interest from previous periods. This is often called "interest on interest" and is the standard for mortgages, savings accounts, and long-term investments.
The Formulas Used:
The formulas are based on the variables: Principal ($P$), Annual Rate ($r$), Time in Years ($t$), and Compounding Periods per year ($n$). **Simple Interest:** $$ A = P(1 + rt) $$ **Compound Interest:** $$ A = P\left(1 + \frac{r}{n}\right)^{nt} $$ Where $A$ is the final **Future Value**.