The concept of compound interest is that rather than having the interest added only once at the end, the interest is added periodically back onto the principal sum so that future interest is earned on the added interest during the next compounding period. The above calculator also includes the equation to determine the future value of a series of monthly contributions to the investment - that is, on top of the principal investment amount, an additional monthly contribution is added by the investor.

Financial Assessment

the compound interest formula above assumes that the interest calculation occurs before the regular deposit is added on and does not account for all mathematical and financial theory limitations. The financial calculators have been provided with educational purposes in mind and should be used accordingly. As with all calculations care must be taken to keep consistent units throughout with examples of units which should be adopted listed below:

Notation

• P = The principal investment (the initial deposit or amount), as a dollar value
• PMT = The monthly repayment
• A = The future value of the investment/loan, including interest, as a dollar value
• r = the annual interest rate, as a percent
• n = the number of times that interest is compounded per year, e.g. 12 times per year is equivalent to compounded monthly
• t = the number of years the money is invested or borrowed for, in years