Home
Back
Compound Interest Formula:
| From: | To: |
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. For CPF (quarterly compounding), interest is calculated and added to the principal four times per year.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how much your investment will grow with quarterly compounding, where interest is added to the principal four times per year.
Details: Understanding compound interest is crucial for financial planning, retirement savings, and investment decisions. It shows how money can grow over time through the power of compounding.
Tips: Enter principal amount in dollars, annual interest rate as a decimal (e.g., 0.05 for 5%), and time in years. All values must be positive numbers.
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 CPF?
A: CPF interest is compounded quarterly, meaning interest is calculated and added to the principal four times per year.
Q3: What is a good interest rate for CPF?
A: CPF interest rates vary by account type but are generally competitive with safe investment options, typically ranging from 2.5% to 4% annually.
Q4: Can I use this calculator for other compounding frequencies?
A: This calculator is specifically designed for quarterly compounding. For other frequencies, the formula would need to be adjusted.
Q5: How does compounding affect long-term savings?
A: Compounding significantly boosts long-term savings growth, as interest earns interest over time, creating exponential growth.