Let’s see how it can be done! Calculation using Mathematical Formula
Using Excel Investment Calculator, you can easily calculate different attributes of compound interest. So, you will earn a total of $21 in interest rather than $20 as in the case of simple interest. In the first year, you will earn $100*0.10 i.e. The longer you save, the more interest you will earn.įor example, you deposit $100 for 2 years at a compound interest of 10%. you earn interest on both:Īs opposed to simple interest, it is assumed that the interest earned is reinvested and in the future periods, you will be earning interest on both principal and reinvested interest (not just on principal amount). Compound interest is often referred to as “interest on interest” i.e.
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