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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164 votes
24 answers
58k views

Why do people save so much?

When I am old and retired (70 years +), I don't plan to spend a lot of money. I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. Since I don't need ...
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4 votes
1 answer
349 views

Future value of a compound-interest savings account when contributions are inflation linked

I've got a savings objective to achieve in 6 years and I'm trying to work out the percentage of salary I need to put towards it to achieve it. I am trying to work out how to calculate the future ...
1 vote
1 answer
165 views

What is the formula for loan payoff with daily compounded interest and annual payment?

I am trying to get the loan repayment amount for below data : Loan Amount: $20,412.65 Payments (#): 10 Annual Interest Rate: 2.5% Loan Date: 07/02/2018 First Payment Due: 09/02/2018 (next payment ...
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4 votes
1 answer
425 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.
-2 votes
1 answer
138 views

How to calculate the future expenditure of education :

Suppose the following: if a child's age is 2 years today and he/she will go to college at the age of 15 years for 2 years(duration of education) and for which Cost incurred P.A. as on today (Rs.) ...
61 votes
9 answers
26k views

What are the alternatives to compound interest for a Muslim?

I have read the importance of saving early and the power of compound interest many many times. However I am a Muslim and cannot participate in anything involving interest. I also learned that keeping ...
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19 votes
2 answers
72k views

How do I calculate monthly compound interest in Google Sheets?

I have a financial spreadsheet with a column of all my deposits into my savings account. The leftmost column lists the dates of the deposits. Now, let's say my savings balance is $100.00 and my ...
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7 votes
6 answers
4k 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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2 votes
2 answers
408 views

Effective Interest Rate Interpretation

Assume a $1,000 loan for 24 months, with monthly interest rate 2.5%, and monthly payments ($55.91 as calculated by any online tool, e.g. here). This will give us annual interest rate (air) of 30%, ...
2 votes
1 answer
322 views

Loan payoff benefit versus raise. Break-even point needed

I have student loans that are under a program that pays off any remaining balance after 10 years of work. I become ineligible for this benefit if I change companies. So, I need to figure out, at what ...
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1 vote
2 answers
519 views

Compound Interest & Mortgages

Mortgages are compounded 2 times a year in Canada and 12 times a year in the USA. However, I read that mortgages are simple interest and not compound interest because you pay the interest for each ...
10 votes
2 answers
3k views

Continuous compounding in practice

A common explanation for the mathematical constant e (2.71828...) is that it is the factor by which an investment would grow at 100% interest rate over a period if it is continuously compounded. In ...
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2 votes
3 answers
1k views

Interest rate question

I'm having a little trouble figuring this out. Suppose I took out a loan with the following terms: Loan Amount: 1,000 Interest Rate (APR): 10% Compound Frequency: Monthly (12 compounding periods) ...
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1 vote
2 answers
3k views

How to profit from compound interest when investing in single stocks? [duplicate]

I started investing in the stock market last year. I've read tons of information and tried different products. My knowledge about compound interest is, when you invest in one stock, get 5% return, ...
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1 vote
2 answers
305 views

Calculating Effective Annual Interest Rate & Annual Percentage Rate with fees (in R)

Problem How to calculate Effective Annual Interest Rate (EAR) and Annual Percentage Rate (APR) with fees (in R) ? I am interested in getting to know how much I am actually paying interest when fees ...
0 votes
1 answer
4k views

What is the formula for calculating the amount of money I end up with in a given period (salary and compounding effect)?

I'll give a concrete example (couldn't find a similar question): Let's say I have an amount of money M at time t = 0 (first month). Every month, I get a given amount (let's say constant) of R On my ...
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-1 votes
3 answers
118 views

How rate of interest affects inflation rate [duplicate]

Suppose i invest 100000 today.and suppose rate of interest is 12% and inflation rate is 6% . so what amount i will get after 2 year at the rate of 12% and inflation of 6%. In other word you can say,...
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