Compound Interest Calculator over 5 Years
Let’s assume an initial principal amount (P), an annual interest rate (r), and the number of times interest is compounded per year (n). With these assumptions, we can use the formula for compound interest:
A=P×(1+rn)ntA = P \times \left(1 + \frac{r}{n}\right)^{nt}A=P×(1+nr)nt
Where:
- AAA is the amount of money accumulated after n years, including interest.
- PPP is the principal amount (the initial amount of money).
- rrr is the annual interest rate (in decimal).
- nnn is the number of times that interest is compounded per year.
- ttt is the time the money is invested for, in years.
Let’s assume:
- P=$1000P = \$1000P=$1000 (initial principal amount)
- r=0.05r = 0.05r=0.05 (annual interest rate, 5%)
- n=1n = 1n=1 (compounded annually)
We can create a table to calculate the compound interest over 5 years.
| Year | Principal Amount | Interest Earned | Total Amount |
|---|---|---|---|
| 1 | $1000.00 | $50.00 | $1050.00 |
| 2 | $1050.00 | $52.50 | $1102.50 |
| 3 | $1102.50 | $55.13 | $1157.63 |
| 4 | $1157.63 | $57.88 | $1215.51 |
| 5 | $1215.51 | $60.78 | $1276.29 |
You can see how the principal amount grows each year with the added interest. Keep in mind that this is just a simple example and doesn’t account for factors like taxes or fees. Also, real-world interest rates may vary.
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