Compounding Periods/Year = 4

Principal =

Term =

Interest/Year =

Ending Amount =

Effective Rate Of Return =

Calculates compound and simple interest problems assuming lump sum payments at the end of a loan or investment. Also calculates the effective interest rate.

Compound interest accumulates interest each period, increasing the total return. Compound interest is used for calculating most loans, leases and savings accounts.

Simple interest problems assume interest is accumulated only once, at the time it is due along with the principal at the end of the term.

- Compounding Periods/Year: how often interest compounds, continuously, quarterly, monthly or yearly. Set to simple to calculate a simple interest problem.

- Principal: initial amount loaned or invested.

- Term: number of periods the principal is lent or invested.

- Interest/Year: interest rate expressed as a percentage.

- Ending Amount: principal plus interest returned at the end of the loan period.

- Effective Interest Rate: the interest rate actually paid or earned over the life of the loan.

Contributed by Gary Wiese.

You lent $1,000 to a friend to be paid back with 3% simple interest in 5 years. What would be the payment?

- Compounding Periods/Year: simple

- Principal: $1,000.00

- Term: 5 years

- Interest/Year: 3.000%

The Ending Amount is $1,150.00.

If the same loan was paid back with monthly compounding interest, what would be the ending amount?

- Compounding Periods/Year: monthly

The Ending Amount is $1,161.62.

How long would it take to double your money if $1,000 was invested at 5% interest compounding continuously?

- Compounding Periods/Year: continuous

- Principal: $1,000.00

- Interest/Year: 5.000%

- Ending Balance: $2,000.00

It would take 13.9 years to double your money.

Compounding Periods/Year

Principal

Term

Interest/Year

Ending Amount

Effective Rate Of Return

-------------

effective interest rate

effective rate

annual equivalent rate

effective annual interest rate