Example: Let's say you have some money to invest, and you want to calculate how much you will have at the end of 5 years if you invest Rs. 10,000 at an annual interest rate of 5% with different compounding frequencies.
- Principal Amount (Rs.): Enter the initial investment amount, example is Rs. 10,000, in the "Principal Amount" field.
- Rate of Interest (%): Input the annual interest rate, which is 5%, in the "Rate of Interest" field.
- Tenure (years): Specify the investment period, which is 5 years, in the "Tenure" field.
- Compounding Frequency: Choose a compounding frequency to see how it affects your investment:
- For the first calculation, choose "Annually."
- For the second calculation, choose "Semi-Annually."
- For the third calculation, choose "Quarterly."
- For the fourth calculation, choose "Monthly."
- Calculate: Click the "Calculate" button after each selection to see the results.
Results:
- For "Annually" compounding:
- Maturity Amount (Rs.): The calculator will display the maturity amount, which is the total amount you'll have at the end of 5 years with annual compounding.
- Gain (Rs.): The calculator will show the interest earned during the investment period.
- Repeat steps 4 and 5 for "Semi-Annually," "Quarterly," and "Monthly" compounding frequencies to see how the compounding frequency affects the results.
Here's a summary of what you might find:
- With "Annually" compounding, the interest is applied once a year.
- With "Semi-Annually" compounding, the interest is applied twice a year.
- With "Quarterly" compounding, the interest is applied four times a year.
- With "Monthly" compounding, the interest is applied twelve times a year.
By comparing the results with different compounding frequencies, you can see how the frequency of interest application impacts your investment growth. This example demonstrates how the calculator can help you make informed financial decisions based on different scenarios.