Questions tagged [compound-interest]

Compound interest is the result of reinvesting interest so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

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33 views

How do I create a compound interest table where I can see each calculation indefinitely [migrated]

Google sheets novice here... I want to set up a compound interest table. I want to start with $15 and multiply by 1.0125 indefinitely. I want to be able to see the answer for each calculation (for ...
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54 views

Am I using the right method for this compound / simple interest problem with annual deposits?

I am trying to solve the following exercise: A bank account is opened at the beginning of the year 2013 by making a one-off deposit of £1000. A further deposit of £200 is made at the beginning of each ...
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Website that calculates interest payable depending on AER, balance, and flows in and out [closed]

I programmed a Python script that computes compound interest on an account depending on the AER, the initial balance, duration, and transactions during the period. I include the code below. (I did ...
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109 views

Cannot understand the 10 year VTI growth chart on Vanguard

The image below shows the performance of Vanguard Total Stock Market ETF (NYSE Arca: VTI). I cannot understand how $10,000 becomes $34,070 after 10 years with a 10-year return of 12.80%. Shouldn't it ...
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EU APR calculation, solving for APR

I'm looking for some help with a finance homework. We've been given the FCA calculation for APR: Source: https://www.handbook.fca.org.uk/publication/handbook/graphic/13449.png We've also been given a ...
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1answer
49 views

Interest Rate Interpretation

If someone says that the six month interest rate is 5% quoted for an act/360 daycount with semi annual compounding, this means that the amount to pay on a loan of $1 to be repaid in a year is 1.025^2, ...
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151 views

When computing monthly interest, why do we divide yearly interest by 12, rather than taking the 12th-root?

I've been reading about loans and interest rates, and I've run across a mathematical sticking point. The crux is that, if my loan's outstanding balance is £100,000, I make no payments, and it has an ...
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66 views

How do you treat interest (both simple and compound) earned on cryptocurrencies?

Currently, on an exchange platform, I am pledging about 10 BCH (approx. $2800) which should earn interest p.a. of 8 % paid out every three months. The interest is paid in BCH, meaning that 8% of 10 ...
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Index fund question regarding Vanguard 500 Index Fund Admiral Shares - compound interest

I created an account with TDAmeritrade and started investing in VFIAX(Vanguard 500 Index Fund Admiral Shares) three years ago. At the time, I thought that I am investing in an index fund. However I ...
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4answers
277 views

Why do banks pay a compound interest on deposits instead of simple interest?

Why do banks pay a compound interest on deposits? Obviously they'd be better off paying a simple interest instead, which would still be attractive to their customers. However I figured that in such a ...
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82 views

Is there a concept similar to “continuous compounding” but related to dollar cost averaging when buying (e.g.) shares or bitcoins?

I know that dollar cost averaging (DCA) is "drip feeding" a total amount to be invested over regular intervals like daily, weekly or monthly, so that each share purchase (or whatever the ...
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36 views

Calculate term of mortgage based on monthly payment value

Using the PMT formula in Excel, I can calculate the monthly payments based on the interest on the loan (e.g.2%), the principal value of the loan (e.g. £100,000), and the term of the loan (e.g. 25 ...
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1answer
87 views

Calculating the compounding interest formula for an overnight rate

I am VERY NEW to all this industry, so I apologize in advance if my question is too simple. I am given the formula to calculate the compounded rate, where Ri is the effective rate and k is the ...
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Inflation and the current value of my dollar

I am trying to figure out the value of my $100 with a hypothetical 2% constant inflation rate after 30 years. Here is the scenario: suppose I have $100 laying under my bed and the hypothetical ...
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1answer
105 views

Is it good to invest in mutual fund during the down time in market?

Say there is a mutual fund and its annual return in the past 3 years i.e. 2017, 2018, 2019 were -10%, +20%, and -10% respectively. A and B invest $100 in this fund at different time points. A ...
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1answer
54 views

Can I renegotiate desirable rates and terms on a paid-off credit card?

I would like to keep and use my business credit card, but I do not need it. I paid off around $10k today which took my balance to zero, now that my 0% introductory rate has ended. (The card is around ...
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How much benefit we earn with no cost emi on CC

I am thinking to take a policy on no cost emi of CC. I want to find money I saved annually by opting to no cost emi against paying all premium lumpsum at the start of the year. I want to consider ...
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2answers
56 views

Find ending balance given return rate and amount added each year

If I have an investment that grows 10% per year, and every year I add an amount, is there a formula that can be used to find my ending balance after n years? The following demonstrates this: year 0: ...
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1answer
54 views

Average Yearly Return: is this correct?

If an initial investment of 100'000 results in 200'000 after 10 years (including the initial investment), is it correct to say that the investment has returned on average 10% per year? I am guessing ...
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1answer
394 views

Compound interest rate

Given annual interest rate r_ann and n compounds per year, why do we use the formula (1+r_ann/n)^tn rather than (1+r)^tn given r = (1+r_ann)^(1/n) - 1.
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How does a break in contributions (eg. working holiday) affect superannuation over time?

I'd like to better understand how a break in superannuation contributions during a working holiday affects the long term balance. Say I'm 35 years old and accumulated $100,000 AUD in Australian ...
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2answers
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Buy and hold to mitigate taxation

Today I came up with a reason why selling stocks too early might be a bad idea: Imagine that we invest $100 in stocks. If we assume a constant annual growth of 10% the after say 50 years, we would ...
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63 views

Calculate hypothetical stock value in n years at todays' dollars? [closed]

I'm new to investing. If I buy hypothetical stock that meets this criterion: 100 shares at $100 per share Shares increase in value by 10% per year Inflation is 2% per year In today's dollars, what ...
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111 views

How has the modern era of low dividend paying index affect the principles of compound interest?

From my understanding: *To keep it simple, we will keep the asset as index S&P500, not including asset allocation. Compound interest (or compounding interest) is interest calculated on the ...
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How to calculate savings account interest if you deposit and withdraw irregularly?

It's easy to calculate interest on a fixed principal. If you have for example $1000 deposit on your savings account and the rate is 0.25% compounded every whatsoever and you want to know how much is ...
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1answer
114 views

Are Offset Accounts OR Paying of Mortage Going to Give Me a Better ROI

I've been looking into my finances lately (I am an armchair finance person). And it looks to me, that my return on investment isn't going to be the same, if for example, I put $12000 in an offset ...
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1answer
298 views

How do compound interest calculations interact with penny round-off?

[As I have very little experience on money.SE, I welcome feedback about the following question, in addition to any answers of course.] The balance on a loan or deposit is always reported as an ...
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4answers
174 views

What formula can I use to calculate compounding interest with recurring investments?

Assume I am saving X dollars per year every year, and every year I earn 10 percent on what I saved the previous year. e.g. if I am saving 100 dollars every year I would see the trend: 100, 210, 331, ...
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86 views

Interest rate quoting conventions in financial markets

I'm aware that there exist different day count conventions for rates depending on the market but I'm still confused when it comes to the way interest rates are quoted on the market. Example if LIBOR ...
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1answer
146 views

How is interest calculated on a UK type 1 student loan?

On my student loan annual statement it says The Student Loan Company applied interest to my balance every month but only received one lump sum payment at the end of the year from HMRC, even though ...
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2answers
150 views

Calculating Annuities With Different Compounding period and Interest Period

Can anyone Help me solve this? In July 2010, Mike deposits $100 semiannually into an account compounding quarterly at 7% nominal annual interest for three years. In July 2013, he increases the ...
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67 views

Is there a general term for the increased impact of annual management fees, on investments with a positive return?

In conversations with friends, they are often very surprised at the net difference between the total of two investments with identical positive returns, which can be attributed to different annual ...
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69 views

How do I calculate an average monthly income, with accurate yields, from dividend stocks paid quarterly and monthly?

I have a column that has evolved over months and I have another spreadsheet with my positions (my stocks, # of stocks, dividends payout and dividend yield). Those won't move. However, some of my ...
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251 views

What compounding frequency should I choose for this retirement calculator if I invest not in bonds, but in S&P500

I am trying to use a retirement savings/investment calculator using this: https://www.getsmarteraboutmoney.ca/calculators/compound-interest-calculator/ I chose initial investment of $1500, monthly ...
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1answer
47 views

How to calculate equivalent interest rate of gains with monthly contributions?

I started the year with a known amount of funds in my account and I make regular (assume equal) monthly payments into the account. I know how much my gain/interest for the year is. I believe the ...
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1answer
48 views

Chart showing returns by asset class vs CAGR [closed]

I know of charts that show yearly returns by asset class. Are there charts that show 10 year CAGR by asset class?
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1k views

Help with a homework question calculating interest

Question : Imagine that you deposit $6,000 a year, starting one year from today, for four years into a savings account paying 6% per annum. (That is one deposit of $6,000 per year.) How much money ...
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194 views

Definition of compound interest

The textbook by John Hull (9/e) describes "quarterly compounding" on page 80: If the interest rate is measured with annual compounding, the bank’s statement that the interest rate is 10% ...
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203 views

Compound interest, no dividends, no share price change

I've read about compounding and understand dividend reinvestment, but still not sure about compounding on stocks with no dividends. Is this scenario correct? Share purchase price = $ 10.00 $ 0 ...
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3k views

Does the growth of home value benefit from compound interest?

I read Investopia's definition and my take away is that compound interest applies to an investment that yields some return on a regular basis and that yield is reinvested in that instrument. If I have ...
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4answers
159 views

What is an appropriate metric measure average annualized rate of return for an average investor?

Let us say an investor invests $X per year for N years. Let us say the final portfolio value is $Y. In this scenario, how should I measure a metric that quantifies "average annualized return"? I ...
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1answer
24 views

Can I report all my taxable interest in Schedule CA NR Column E even if I wasn't a resident for the entire year?

Filing 2016 taxes. The place I having a savings account in reported $12 in 1099-INT. I started living in California at the end of January. Will my taxes get rejected if I report all $12 in column E ...
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280 views

How much do I need to save per month in an interest-bearing account to reach a certain account balance in a certain number of years?

How do I calculate what my monthly contribution should be to an interest bearing account, knowing how much I'll need to have in the account in a given number of years? For Example, I need $8,203.03 ...
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1answer
145 views

What kind of interest rate is used on treasury bills?

Let me use an example. If we say the yield to maturity of 1 month treasury bill is 2.414% now, what exactly does it mean? In actuarial notations, this number can mean effective interest rate (APY), ...
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43 views

Finding the price of an item years earlier from compound interest, simple interest, or APY

Is there a way to use the compound interest formula, simple interest, or APY to find the price of something years earlier if the price of it was increasing by a certain percentage annually?
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177 views

When to make Credit Card payments on large balance with interest

Consider the following scenario: A credit card has a balance of $5000 that cannot be paid off at this time. Every week I earn $500 that is deposited to my bank. My monthly minimum payment is $200. ...
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659 views

Does compounding frequency have any bearing on the return on investment?

If I take 100 dollars and put it into a savings account that pays me 5% annual interest which compounds monthly. At the end of the year I will have $105.12 If I take the same 100 dollars and invest ...
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2answers
157 views

effective rate loan installment

Why is it that the effective rate is based on compounding and it is also paid only on the remaining loan balance in compounding interest we pay interest on interest? Can someone explain in to me? what ...
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248 views

How to calculate the payback period when income is reinvested? [closed]

Could someone please show me how to calculate the payback period with compounded interest? So if I had a initial investment of $100, paying 1.5% interest annually that is reinvested, how do I ...
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2answers
1k views

interest compounded daily vs monthly

I want to compare two saving accounts with same APY, but one has interest "compounded daily and credited monthly" and the other has interest "compounded monthly and credited monthly". Which will yield ...