About Interest Calculation

This calculator supports both simple and compound interest, periodic contributions, tax and inflation adjustment, and provides a detailed accumulation schedule.

Simple Interest

Simple interest is calculated only on the original principal. It is commonly used for short-term loans and some consumer loans in the United States.

Formula: Interest = Principal × Rate × Time

Example: If you invest $1,000 at an annual interest rate of 5% for 3 years:
Interest = $1,000 × 5% × 3 = $150
Total Amount = $1,000 + $150 = $1,150

Compound Interest

Compound interest is calculated on the principal and also on the accumulated interest of previous periods. It is the standard for savings, investments, and many loans in Europe and worldwide.

Formula: Final Amount = Principal × (1 + Rate / n)n × t
where n is the number of compounding periods per year, and t is the number of years.

Example: If you invest $1,000 at an annual interest rate of 5% compounded monthly for 3 years:
n = 12
Final Amount = $1,000 × (1 + 0.05 / 12)^{12 × 3} ≈ $1,161.62
Total Interest = $1,161.62 - $1,000 = $161.62

Periodic Contributions

If you make regular contributions, the formula for the future value of a series of payments (ordinary annuity) is:
FV = P × (1 + r)nt + PMT × [((1 + r)nt - 1) / r]
where PMT is the periodic contribution, r is the periodic interest rate, n is the number of periods per year, and t is the number of years.

Parameters Explained

• Principal: The initial amount of money invested or loaned.
• Interest Rate: The percentage of the principal paid as interest each year.
• Compound Frequency: How often interest is added to the principal (e.g., monthly, annually).
• Investment Length: The total time the money is invested or borrowed.
• Contribution: Additional money added at regular intervals.
• Tax Rate: The percentage of interest paid as tax.
• Inflation Rate: The rate at which money loses value over time.

Accumulation Schedule

The accumulation schedule shows the balance of the investment at the end of each period. The deposit is the amount added, the interest is the amount earned, and the ending balance is the total at the end of each period.

After-Tax and Inflation-Adjusted Balance

The after-tax balance is the total after taxes on interest are deducted. The inflation-adjusted balance shows the real value of your investment after accounting for inflation.